Price Dynamics in Commodity Market: A Comparison between European and US Markets

11 Pages Posted: 20 Apr 2012

See all articles by Jean-Christophe Statnik

Jean-Christophe Statnik

University of Lille II - University of Lille LSMRC & ISA

David Verstraete

Université Lille Nord de France

Date Written: April 19, 2012

Abstract

This paper tests for the presence of long memory and nonlinearity in returns and volatility for six agricultural futures daily prices series, three traded on MATIF Euronext (Wheat, Corn & Rapeseed) and three traded on CBOT (Red Winter Wheat, Corn & Soybean) over the period from 2000 to 2010. If the price dynamics on the CBOT market seems to be described by classical ARMA-Garch modeling, time series dependences on the MATIF market do not appear to be fully described only by short-term dependences. Using various criteria such as Hurst exponent, correlation dimension and BDS test, the result suggests the presence of long memory for the European market. However, it appears that low fractional order of ARFIMA-type or FiGARCH-type models can explain, but not all, the observed nonlinearity. Nonlinearity could be influenced by regime shift. Subsequently we screened series of structural breaks influence on volatility. Breaks seem be caused by temporary public intervention on the market. Although we cannot fully accept the assumption of independence for all filtered series, serial dependences on the MATIF series appear to be largely explained by structural changes on volatility related to the policy of public intervention in the market.

Keywords: commodities markets, Market Efficiency

JEL Classification: Q14, D53, G13

Suggested Citation

Statnik, Jean-Christophe and Verstraete, David, Price Dynamics in Commodity Market: A Comparison between European and US Markets (April 19, 2012). Available at SSRN: https://ssrn.com/abstract=2042702 or http://dx.doi.org/10.2139/ssrn.2042702

Jean-Christophe Statnik (Contact Author)

University of Lille II - University of Lille LSMRC & ISA ( email )

1, rue de Mulhouse
Lille, 59000
France

David Verstraete

Université Lille Nord de France ( email )

CS-90005-F 59044 Lille cedex
Lille, 59000
France

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