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Price Discovery in the Malaysian Crude Palm Oil Market: The Role of FCPO Across Normal and Disruptive Regimes

In: Proceedings of the 13th International Conference on Business, Accounting, Finance and Economics (BAFE 2025)

Author

Listed:
  • Jude W. Taunson

    (Universiti Malaysia Sabah, Labuan Faculty of International Finance)

  • Minah Japang

    (Universiti Malaysia Sabah, Labuan Faculty of International Finance)

  • Abdul Kamal Char

    (Universiti Malaysia Sabah, Labuan Faculty of International Finance)

  • Ricky Chia Chee Jiun

    (Universiti Malaysia Sabah, Labuan Faculty of International Finance)

Abstract

This study examines the price-discovery role of the Malaysian crude palm oil (CPO) spot and futures (FCPO) markets from January 2023 to June 2025, focusing on disruption episodes, the 2023 floods, and the B40 biodiesel mandate implemented in Indonesia. Using daily data, the analysis applies Johansen cointegration, Vector Error-Correction Models (VECM), Granger causality, the Information Share (IS) of [23], and robustness checks via VECM–GARCH. Whole-sample results indicate a dual mechanism: futures act as the primary venue for information arrival, while spot prices restore long-run equilibrium. Hasbrouck’s IS attributes about 75% of innovations to spot, underscoring its anchoring role. Sub-period results reveal regime dependence: spot leads in floods, futures dominate in B40 biodiesel mandate and tranquil periods, though IS consistently tilts toward spot. Overall, the findings confirm a futures-led, yet spot-anchored, process, with leadership varying across regimes. The results carry implications for policymakers, hedgers, and traders navigating Malaysia’s palm oil markets.

Suggested Citation

  • Jude W. Taunson & Minah Japang & Abdul Kamal Char & Ricky Chia Chee Jiun, 2025. "Price Discovery in the Malaysian Crude Palm Oil Market: The Role of FCPO Across Normal and Disruptive Regimes," Advances in Economics, Business and Management Research, in: Thurai Murugan Nathan & Abdelhak Senadjki & Hemaniswarri Dewi Dewadas & Siti Nur Amira Othman & Ravi (ed.), Proceedings of the 13th International Conference on Business, Accounting, Finance and Economics (BAFE 2025), pages 224-243, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-968-1_17
    DOI: 10.2991/978-94-6463-968-1_17
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