Changing Price Dynamics in Agricultural Commodity Markets
We analyze the speed of mean reversion (k) in the convenience yield and the spot price volatility for 7 US commodities between 1989-2012. In the hog market k is large, soybeans exhibit the lowest values. While for 5 of 7 commodities κ is lower in the more recent period (2005-2012) than in the pre energy period, soybeans and copper show the opposite behavior. A decreasing speed of k implies that the growth rate of the futures prices rises and thus the gap between the nearest and the farthest maturities increases. The estimated spot price volatilities increased for agricultural commodities.
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