Furuoka, Fumitaka and Yaya, OlaOluwa Simon and Ling, Pui Kiew and Al-Faryan, Mamdouh Abdulaziz Saleh and Islam, M. Nazmul (2023) Transmission of risks between energy and agricultural commodities: Frequency time-varying VAR, asymmetry and portfolio management. Resources Policy, 81. ISSN 0301-4207, DOI https://doi.org/10.1016/j.resourpol.2023.103339.
Full text not available from this repository.Abstract
This paper examines energy and agricultural commodities' short-run and long-run connectedness by using the Time -varying parameter vector autoregressions (TVP-VAR). It applies the frequency version of the TVP-VAR model, which is a modified version of the dynamic TVP-VAR model. The frequency decomposition definition also decomposes into short-run and long-run connectedness. We further the analysis by investigating the effect of asymmetry in returns on connectedness. It also examines how portfolio management strategies would lead to a maximization of profits with minimal risks. Empirical evidence indicates that only 32.52% and 31.38% of connectedness in oil and gas, respectively, are transmitted to agricultural commodities, which suggests their weak tendencies in influencing agricultural commodities; the total connectedness index hovers around 40-60% in the 2018-2019 period; however, it dropped below 40% in 2020-2021 when the COVID-19 pandemic contributed to disintegrate the connectedness between energy and agricultural commodities but increased further during the 2022 Russia-Ukraine saga. The findings also indicate that corn, wheat, and flour are net transmitters of risks to oil and natural gas in the long and short-run, and wheat-flour pairwise connectedness is the strongest in the connectedness. Asymmetry is also pronounced in the network of connectedness. Portfolio analyses indicate that investors require a low proportion of energy in a portfolio of energy-agricultural com-modities to achieve an optimum profit. The findings will offer exciting insights into the connectedness of agri-cultural and energy commodities, particularly during periods of high price uncertainty.
| Item Type: | Article |
|---|---|
| Funders: | UNSPECIFIED |
| Uncontrolled Keywords: | Agricultural commodity; Asymmetry; Frequency TVP-VAR; Optimal weight; Risk |
| Subjects: | Q Science > Q Science (General) S Agriculture > S Agriculture (General) |
| Divisions: | Deputy Vice Chancellor (Academic & International) Office Deputy Vice Chancellor (Academic & International) Office > Asia-Europe Institute |
| Depositing User: | Ms Zaharah Ramly |
| Date Deposited: | 25 Oct 2024 03:46 |
| Last Modified: | 25 Oct 2024 03:46 |
| URI: | http://eprints.um.edu.my/id/eprint/38493 |
Actions (login required)
 |
View Item |
