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arXiv · 2303.11030

Tail dependence structure and extreme risk spillover effects between the international agricultural futures and spot markets

Yun-Shi Dai·Peng-Fei Dai·Wei-Xing Zhou
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Abstract

This paper combines the Copula-CoVaR approach with the ARMA-GARCH-skewed Student-t model to investigate the tail dependence structure and extreme risk spillover effects between the international agricultural futures and spot markets, taking four main agricultural commodities, namely soybean, maize, wheat, and rice as examples. The empirical results indicate that the tail dependence structures for the four futures-spot pairs are quite different, and each of them exhibits a certain degree of asymmetry. In addition, the futures market for each agricultural commodity has significant and robust extreme downside and upside risk spillover effects on the spot market, and the downside risk spillover effects for both soybeans and maize are significantly stronger than their corresponding upside risk spillover effects, while there is no significant strength difference between the two risk spillover effects for wheat, and rice. This study provides a theoretical basis for strengthening global food cooperation and maintaining global food security, and has practical significance for investors to use agricultural commodities for risk management and portfolio optimization.

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Yun-Shi Dai, Peng-Fei Dai, Wei-Xing Zhou. 2023-03-20. Tail dependence structure and extreme risk spillover effects between the international agricultural futures and spot markets. https://doi.org/10.1016/j.intfin.2023.101820

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