A0839
Title: The hard, transition, and the good times
Authors: Emmanuel Fianu - De Montfort University (United Kingdom) [presenting]
Daniel Felix Ahelegbey - University of Pavia (Italy)
Roberto Casarin - University Ca' Foscari of Venice (Italy)
Luigi Grossi - University of Parma (Italy)
Abstract: The aim is to expand the analysis of various interactions spanning over two decades to examine the extreme downside interconnectedness between crude oil and agricultural commodity futures markets. In effect, it captures and provides updated information that details the degree of interrelatedness of various unique abnormal market situations. By focusing on tail dependencies, the aim is to uncover the varying structural dynamics that drive co-movements during periods of market stress. Utilizing daily price data for crude oil, ten agricultural commodities, and the Bloomberg Commodity Index, advanced econometric models are employed to quantify the extreme downside risk and their interactions via a novel, innovative network structure. It is also investigated which markets act as a flight to safety during extreme events, and it is identified that markets that dominate risk transmission or are vulnerable to tail risk propagation. Results show that soya bean meal and soya bean are the major recipients of tail risk in all the periods on average, whilst corn is a major transmitter of tail shock that permeates through all the various scenarios. The empirical evidence suggests varying degrees of interconnection among the commodity market index, oil commodity futures, and agricultural commodity futures markets, coupled with a decreasing trend of hedging effectiveness.
