The Extent of Virgin Olive-Oil Prices' Distribution Revealing the Behavior of Market Speculators

Posted: 8 Sep 2016

See all articles by Fathi Abid

Fathi Abid

University of Sfax, Faculty of Economic and Management Sciences, Probability & Statistics Laboratory

Bilel Kaffel

University of Sfax - Higher Institute of Business Administration; University of Sfax - Higher Institute of Business Administration

Date Written: September 4, 2016

Abstract

The major problem facing olive oil producers each winter campaign, contrary to what is expected, is not whether the harvest will be good or not but whether the sale price will allow them to cover production costs and achieve a reasonable margin of profit or not. The aim of this paper is to study the olive oil price formation mechanisms in order to learn about the traders’ behavior in the olive oil market. We econometrically study the price formation by implementing statistical models and we provide an economic explanation for the stylized facts detected in olive oil price series. For prediction purposes, we use the ANN approach. Our main findings indicate that the AR(1)-GJR(1,1) and the Ornstein-Uhlenbeck process with stochastic volatility model succeeded to some extent in capturing the series stylized facts. The unstable participants’ behavior creates the volatility clustering, non-linearity dependent and cyclicity phenomena. By imitating each other in some periods of the campaign, different participants contribute to the fat tails observed in the olive oil price distribution. The best prediction model for the olive oil price is based on a back propagation ANN approach with input information based on discrete wavelet decomposition and recent price past history.

Keywords: Olive Oil Price, Time Series Analysis, Wavelet Transform, Artificial Neural Network

JEL Classification: C22, G10, Q14

Suggested Citation

Abid, Fathi and Kaffel, Bilel, The Extent of Virgin Olive-Oil Prices' Distribution Revealing the Behavior of Market Speculators (September 4, 2016). Available at SSRN: https://ssrn.com/abstract=2834579 or http://dx.doi.org/10.2139/ssrn.2834579

Fathi Abid

University of Sfax, Faculty of Economic and Management Sciences, Probability & Statistics Laboratory ( email )

Road of Airport, Km 4
Sfax, sfax 3018
Tunisia
+216 7427 9154 (Phone)

Bilel Kaffel (Contact Author)

University of Sfax - Higher Institute of Business Administration ( email )

BP 1013

University of Sfax - Higher Institute of Business Administration ( email )

BP 1013

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