Advanced Search
MyIDEAS: Login to save this paper or follow this series

Modelling Long Memory Volatility in Agricultural Commodity Futures Returns

Contents:

Author Info

  • Chang, C-L.
  • McAleer, M.J.
  • Tansuchat, R.

Abstract

This paper estimates a long memory volatility model for 16 agricultural commodity futures returns from different futures markets, namely corn, oats, soybeans, soybean meal, soybean oil, wheat, live cattle, cattle feeder, pork, cocoa, coffee, cotton, orange juice, Kansas City wheat, rubber, and palm oil. The class of fractional GARCH models, namely the FIGARCH model of Baillie et al. (1996), FIEGARCH model of Bollerslev and Mikkelsen (1996), and FIAPARCH model of Tse (1998), are modelled and compared with the GARCH model of Bollerslev (1986), EGARCH model of Nelson (1991), and APARCH model of Ding et al. (1993). The estimated d parameters, indicating long-term dependence, suggest that fractional integration is found in most of agricultural commodity futures returns series. In addition, the FIGARCH (1,d,1) and FIEGARCH(1,d,1) models are found to outperform their GARCH(1,1) and EGARCH(1,1) counterparts.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://repub.eur.nl/pub/32528/EI2012-15.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute in its series Econometric Institute Research Papers with number EI 2012-15.

as in new window
Length:
Date of creation: 01 May 2012
Date of revision:
Handle: RePEc:ems:eureir:32528

Contact details of provider:
Postal: Postbus 1738, 3000 DR Rotterdam
Phone: 31 10 4081111
Web page: http://www.eur.nl/ese
More information through EDIRC

Related research

Keywords: agricultural; asymmetric; commodity futures; conditional volatility; fractional integrations; long memory;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Schwert, G.W., 1989. "Stock Volatility And The Crash Of '87," Papers, Rochester, Business - General 89-01, Rochester, Business - General.
  2. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  3. Stavros Degiannakis, 2004. "Volatility forecasting: evidence from a fractional integrated asymmetric power ARCH skewed-t model," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(18), pages 1333-1342.
  4. Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996. "Fractionally integrated generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, Elsevier, vol. 74(1), pages 3-30, September.
  5. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 347-70, March.
  6. Peter S. Sephton, 2009. "Fractional integration in agricultural futures price volatilities revisited," Agricultural Economics, International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 40(1), pages 103-111, 01.
  7. Ser-Huang Poon & Clive W.J. Granger, 2003. "Forecasting Volatility in Financial Markets: A Review," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 41(2), pages 478-539, June.
  8. McAleer, Michael, 2005. "Automated Inference And Learning In Modeling Financial Volatility," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 21(01), pages 232-261, February.
  9. Keith Jefferis & Pako Thupayagale, 2008. "Long Memory In Southern African Stock Markets," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 76(3), pages 384-398, 09.
  10. Richard T. Baillie & Young Wook Han & Tae-Go Kwon, 2002. "Further Long Memory Properties of Inflationary Shocks," Southern Economic Journal, Southern Economic Association, vol. 68(3), pages 496-510, January.
  11. McAleer, Michael & Chan, Felix & Marinova, Dora, 2007. "An econometric analysis of asymmetric volatility: Theory and application to patents," Journal of Econometrics, Elsevier, Elsevier, vol. 139(2), pages 259-284, August.
  12. Y. K. Tse, 1998. "The conditional heteroscedasticity of the yen-dollar exchange rate," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 13(1), pages 49-55.
  13. Ruiz, Esther & Veiga, Helena, 2008. "Modelling long-memory volatilities with leverage effect: A-LMSV versus FIEGARCH," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 52(6), pages 2846-2862, February.
  14. Ling, Shiqing & McAleer, Michael, 2002. "NECESSARY AND SUFFICIENT MOMENT CONDITIONS FOR THE GARCH(r,s) AND ASYMMETRIC POWER GARCH(r,s) MODELS," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 18(03), pages 722-729, June.
  15. Taisei Kaizoji & Thomas Lux, 2006. "Forecasting Volatility and Volume in the Tokyo Stock Market: Long Memory, Fractality and Regime Switching," Working Papers, Warwick Business School, Finance Group wp06-20, Warwick Business School, Finance Group.
  16. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, Elsevier, vol. 1(1), pages 83-106, June.
  17. Bollerslev, Tim & Ole Mikkelsen, Hans, 1996. "Modeling and pricing long memory in stock market volatility," Journal of Econometrics, Elsevier, Elsevier, vol. 73(1), pages 151-184, July.
  18. Christian Conrad & Michael J. Lamla, 2007. "The High-Frequency Response of the EUR-US Dollar Exchange Rate to ECB Monetary Policy Announcements," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 07-174, KOF Swiss Economic Institute, ETH Zurich.
  19. Kang, Sang Hoon & Yoon, Seong-Min, 2007. "Long memory properties in return and volatility: Evidence from the Korean stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 385(2), pages 591-600.
  20. Coakley, Jerry & Dollery, Jian & Kellard, Neil, 2008. "The role of long memory in hedging effectiveness," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 52(6), pages 3075-3082, February.
  21. Hyun J. Jin & Darren L. Frechette, 2004. "Fractional Integration in Agricultural Futures Price Volatilities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 86(2), pages 432-443.
  22. Davidson, James, 2004. "Moment and Memory Properties of Linear Conditional Heteroscedasticity Models, and a New Model," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 22(1), pages 16-29, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Walid Chkili & Shawkat Hammoudeh & Duc Khuong Nguyen, 2014. "Volatility forecasting and risk management for commodity markets in the presence of asymmetry and long memory," Working Papers, Department of Research, Ipag Business School 2014-325, Department of Research, Ipag Business School.
  2. David C Broadstock & Rui Wang & Dayong Zhang, 2014. "The direct and indirect e ects of oil shocks on energy related stocks," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS), Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey 146, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  3. repec:ipg:wpaper:9 is not listed on IDEAS
  4. Walid Chkili & Shawkat Hammoudeh & Duc Khuong Nguyen, 2013. "Long memory and asymmetry in the volatility of commodity markets and Basel Accord: choosing between models," Working Papers, Department of Research, Ipag Business School 2013-009, Department of Research, Ipag Business School.
  5. Ho, Kin-Yip & Shi, Yanlin & Zhang, Zhaoyong, 2013. "How does news sentiment impact asset volatility? Evidence from long memory and regime-switching approaches," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 26(C), pages 436-456.
  6. Mohamed El Hedi Arouri & Shawkat Hammoudeh & Amine Lahiani & Duc Khuong Nguyen, 2013. "Long memory and structural breaks in modeling the return and volatility dynamics of precious metals," Working Papers, HAL hal-00798033, HAL.
  7. Ederington, Louis H. & Guan, Wei, 2013. "The cross-sectional relation between conditional heteroskedasticity, the implied volatility smile, and the variance risk premium," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(9), pages 3388-3400.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ems:eureir:32528. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePub).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.