Do Cointegrated Commodities Bubble Together? The Case of Hog, Corn, and Soybean

20 Pages Posted: 10 Feb 2017

See all articles by Christos Alexakis

Christos Alexakis

ESC Rennes School of Business

Guillaume Bagnarosa

ESC Rennes School of Business

Michael M. Dowling

ESC Rennes School of Business

Date Written: February 9, 2017

Abstract

Hog, corn, and soybean meal futures are shown to be cointegrated, reflecting the close intrinsic relationship of corn and soybean meal as the primary feed for hogs. Applying a recent technique to date-stamp pricing bubbles we further show that bubbles in feed do not appear to be associated with bubbles in the price of hogs. Instead there are temporary deviations in the spread between hog and feed, but the long-term cointegration relationship leads to a reversion towards the common trend. This finding sheds new insight into the price behaviour of commodities that depend for input costs on other commodities.

Keywords: Hog Spread, Multiple Bubbles, Commodities, Cointegration

JEL Classification: C22, G13, Q14

Suggested Citation

Alexakis, Christos and Bagnarosa, Guillaume and Dowling, Michael M., Do Cointegrated Commodities Bubble Together? The Case of Hog, Corn, and Soybean (February 9, 2017). Finance Research Letters, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2914152 or http://dx.doi.org/10.2139/ssrn.2914152

Christos Alexakis

ESC Rennes School of Business ( email )

Rue Robert d'arbrissel, 2
Rennes, 35000
France

Guillaume Bagnarosa

ESC Rennes School of Business ( email )

2, RUE ROBERT D'ARBRISSEL
Rennes, 35065
France

Michael M. Dowling (Contact Author)

ESC Rennes School of Business ( email )

Rue Robert d'arbrissel, 2
Rennes, 35000
France

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