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Abstract

Asia is presently the most important market for the production and consumption of natural rubber. World prices of rubber are not only subject to changes in demand, but also to speculation regarding future markets. Japan and Singapore are the major futures markets for rubber, while Thailand is one of the world's largest producers of rubber. As rubber prices are influenced by external markets, it is important to analyse the relationship between the relevant markets in Thailand, Japan and Singapore. The analysis is conducted using several alternative multivariate GARCH models. The empirical results indicate that the constant conditional correlations arising from the CCC model lie in the low to medium range. The results from the VARMA-GARCH model and the VARMA-AGARCH model suggest the presence of volatility spillovers and asymmetric effects of positive and negative return shocks on conditional volatility. Finally, the DCC model suggests that the conditional correlations can vary dramatically over time. In general, the dynamic conditional correlations in rubber spot and futures returns shocks can be independent or interdependent.

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File URL: http://www.kier.kyoto-u.ac.jp/DP/DP723.pdf
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Bibliographic Info

Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 723.

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Length: 19pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:kyo:wpaper:723

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Postal: Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501
Phone: +81-75-753-7102
Fax: +81-75-753-7193
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Web page: http://www.kier.kyoto-u.ac.jp/eng/index.html
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Related research

Keywords: Multivariate GARCH; volatility spillovers; conditional correlations; spot returns; futures returns;

Other versions of this item:

Find related papers by JEL classification:

• C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
• C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
• G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
• G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

This paper has been announced in the following NEP Reports:

• NEP-ALL-2010-10-02 (All new papers)
• NEP-SEA-2010-10-02 (South East Asia)

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1. Ling, Shiqing & McAleer, Michael, 2003. "Asymptotic Theory For A Vector Arma-Garch Model," Econometric Theory, Cambridge University Press, vol. 19(02), pages 280-310, April.
   
   • Shiqing Ling & Michael McAleer, 2001. "Asymptotic Theory for a Vector ARMA-GARCH Model," ISER Discussion Paper 0549, Institute of Social and Economic Research, Osaka University.

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Cited by:

1. Chang, C-L. & McAleer, M.J. & Tansuchat, R., 2009. "Modelling conditional correlations for risk diversification in crude oil markets," Econometric Institute Report EI 2009-11, Erasmus University Rotterdam, Econometric Institute.
   
   • Chia-Lin Chang & Michael McAleer & Roengchai Tansuchat, 2009. "Modelling Conditional Correlations for Risk Diversification in Crude Oil Markets," CARF F-Series CARF-F-162, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
   • Chia-Lin Chang & Michael McAleer & Roengchai Tansuchat, 2009. "Modelling Conditional Correlations for Risk Diversification in Crude Oil Markets," CIRJE F-Series CIRJE-F-640, CIRJE, Faculty of Economics, University of Tokyo.
2. Khalfaoui, R & Boutahar, M, 2012. "Portfolio risk evaluation: An approach based on dynamic conditional correlations models and wavelet multiresolution analysis," MPRA Paper 41624, University Library of Munich, Germany.
   
   • Rabeh Khalfaoui & Mohammed Boutahar, 2012. "Portfolio Risk Evaluation An Approach Based on Dynamic Conditional Correlations Models and Wavelet Multi-Resolution Analysis," AMSE Working Papers 1208, Aix-Marseille School of Economics, Marseille, France.

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