Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS), No. 73

Transcription

1 econstor Der Open-Access-Publikationsserver der ZBW Leibniz-Informationszentrum Wirtschaft The Open Access Publication Server of the ZBW Leibniz Information Centre for Economics Jumah, Adusei; Kunst, Robert M. Working Paper The effects of Dollar/Sterling exchange rate volatility of futures markets for coffee and cocoa Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS), No. 73 Provided in Cooperation with: Institute for Advanced Studies, Vienna Suggested Citation: Jumah, Adusei; Kunst, Robert M. (1999) : The effects of Dollar/Sterling exchange rate volatility of futures markets for coffee and cocoa, Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS), No. 73 This Version is available at: Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics

2 Institut für Höhere Studien (IHS), Wien Institute for Advanced Studies, Vienna Reihe Ökonomie / Economics Series No. 73 The Effects of Dollar/Sterling Exchange Rate Volatility on Futures Markets for Coffee and Cocoa Adusei Jumah, Robert M. Kunst

3 The Effects of Dollar/Sterling Exchange Rate Volatility on Futures Markets for Coffee and Cocoa Adusei Jumah, Robert M. Kunst Reihe Ökonomie / Economics Series No. 73 October 1999 Institut für Höhere Studien Stumpergasse 56, A Wien Fax: +43/1/ Adusei Jumah Phone: +43/1/ jumah@ihs.ac.at Robert M. Kunst Phone: +43/1/ kunst@ihs.ac.at Institut für Höhere Studien (IHS), Wien Institute for Advanced Studies, Vienna

4 The Institute for Advanced Studies in Vienna is an independent center of postgraduate training and research in the social sciences. The Economics Series presents research carried out at the Department of Economics and Finance of the Institute. Department members, guests, visitors, and other researchers are invited to submit manuscripts for possible inclusion in the series. The submissions are subjected to an internal refereeing process. Editorial Board Editor: Robert M. Kunst (Econometrics) Associate Editors: Walter Fisher (Macroeconomics) Klaus Ritzberger (Microeconomics)

5 Abstract The paper investigates the extent to which the dollar/sterling exchange rate fluctuations affect coffee and cocoa futures prices on the London LIFFE and the New York CSCE by means of multivariate GARCH models under the assumption that traders in perfectly competitive markets have equal access to all available information on changes in weather and in global demand and supply conditions. In three out of the four investigated cases, exchange rate posed as a main source of risk for the commodity futures price. The significance and form of volatility spill-over effects of a bilateral exchange rate are shown to be specific for commodity and market. A forecasting comparison on the basis of the identified models suggests that possible gains in prediction accuracy may be small. Keywords Commodity markets, multivariate GARCH models, exchange rates, volatility, forecasting JEL Classifications C32, C53, G15, Q14

6 Comments We wish to thank Richard Baillie for providing us with a basic univariate GAUSS program code for the estimation of GARCH models that has helped us much in developing our bivariate ARCH model.

7 Contents 1. Introduction 1 2. Coffee and cocoa markets and their exchange rate linkages 3 3. Methodology Bivariate ARCH models Data characteristics 8 4. Empirical results Model estimation Cocoa futures: London and New York Cocoa and exchange rates Coffee futures: London and New York Coffee and exchange rates Forecasting Summary and conclusion 25 References 26

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21 7 Hpslulfdo uhvxowv 714 Prgho hvwlpdwlrq Dv rxwolqhg lq Vhfwlrq 614/ wkh irupdo prgho zlwk doo lwv sdudphwhuv lv jlyhq dv > w w j ' n 0 > n w 2 w 3 c 22 EE0 0 ' O c S S O ' 2 f n S 2 S c 0 K K K 2 K 3 +7, 22 f Qrwh/ krzhyhu/ wkdw wkh pdwulfhv / / duh hvwlpdwhg lq wkhlu Fkrohvn iruplq rughu wr jxdudqwhh wkhlu srvlwlyh ghqlwhqhvv1 Iru h{dpsoh/ lv iruphg dv ' w S _@}ES 2 cs 2 2w /zkhuhw S S lv wuldqjxodu zlwk xqlw gldjr0 qdo dqg wkxv ghshqgv rq rqh sdudphwhu, S rqo 1 Wkh cprgho sdudphwhuv* S cs 2 cs 22 fruuhvsrqg wr wkh cwhfkqlfdo sdudphwhuv* S cs 2 c, S 1 Hvwlpdwlrq lv frqgxfwhg e d txdvlpo dojrulwkp wkdw lpsrvhv qrupdolw rq wkh huuruv 0 1 Rswlpl}dwlrq ri wkh olnholkrrg ixqfwlrq xvhv wkh EIJV dojrulwkp ri JDXVV wkdw dovr fdofxodwhv qxphulfdo vwdqgdug huuruv dqg ydoxhv1 Gxh wr qhdu0 vlqjxodulwlhv ri vrph pdwulfhv/ pdq ri wkhvh vwdqgdug huuruv dsshdu iudjloh1 Wkhuhiruh/ zh zloo jlyh wkh srlqw hvwlpdwhv ri doo prgho sdudphwhuv dqg ydoxhv iru doo whfkqlfdo sdudphwhuv/ zkloh zh uhiudlq iurp fdofxodwlqj ydoxhv iru wkh wudqviruphg prgho sdudphwhu hvwlpdwhv Frfrd ixwxuhv= Orqgrq dqg Qhz \run Wkh uhvxowv ri d elyduldwh PDDUFK prgho iru wkh wzr frfrd sulfh yduldeohv R u / R rq wkh OLIIH dqg wkh FVFH/ l1h1/ j ' E{*L}R u c {*L}R /duh jlyhq lq Wdeoh 51 Wkh wlph0frqvwdqw sruwlrq ri wkh yduldqfh pdwul{ lv vpdoo dqg wkh DUFK hhfwv duh txlwh lpsruwdqw1 Ehfdxvh wkh vhfrqg gldjrqdo hqwu lv lqvljqlfdqw iru erwk pdwulfhv dqg / wkhvh duh vwdwlvwlfdoo vlqjxodu dqg jlyh pxfk pruh zhljkw wr wkh Orqgrq frpsrqhqw1 D qrq0wulyldo urwdwlrq sdudphwhu ri 316;: zrxog lqglfdwh d wlph0fkdqjlqj frqglwlrqdo fryduldqfh exw lw uhpdlqv lqvljqlfdqw1 Wkh uvw gldjrqdo hohphqw lq lv odujhu/ e d pdjqlwxgh/ wkdq wkh vhfrqg rqh/ khqfh wlph0fkdqjlqj yrodwlolw sod v d odujhu 47

22 uroh lq Qhz \run wkdq lq Orqgrq1 Lq vxppdu / lw dsshduv wkdw yrodwlolw lv pdlqo jhqhudwhg rq wkh Orqgrq ixwxuhv pdunhw e xqxvxdo qhzv/ dqg wklv yrodwlolw wkhq pd dovr vsuhdg wr wkh Qhz \run ixwxuhv pdunhw1 D olnho h{sodqdwlrq ri wklv ihdwxuh uhvwv rq wkh idfw wkdw wkh OLIIH lv e idu wkh odujhu pdunhw +vhh dovr Mxpdk hw do1/ 4<<<,1 Zh qrwh wkdw wkh elyduldwh prgho dssduhqwo frqwudglfwv wkh xqlyduldwh uhvxowv +vhh Wdeoh 4,/ zkhuh qr DUFK hhfwv duh irxqg1 Wklv ghprqvwudwhv wkh lpsruwdqfh ri pxowlyduldwh prgholqj/ dv khwhurvnhgdvwlflw lq fryduldqfh dqg rwkhu lpsruwdqw furvv0hhfwv sdvv xqghwhfwhg lq xqlyduldwh dqdo vlv1 Wdeoh 5= Elyduldwh prgho iru Orqgrq dqg Qhz \run frfrd ixwxuhv1 prgho hvwlpdwhg whfkqlfdo sdudphwhu ydoxh > : > w :138 w : w w f 2 S 717<7 S 6<189 f 2 S 2 31:44, S 431:: f 2 S ; S ;: :: K K 817; K <, K 0614< K K 2 31<4 Qrwh= Wkh ydoxhv lq wkh odvw froxpq fruuhvsrqg wr wkh prgho sdudphwhuv dqg wkhlu srlqw hvwlpdwhv lq wkh uvw dqg vhfrqg froxpq/ h{fhsw iru wkrvh fdvhv zkhuh d whfkqlfdo sdudphwhu zdv xvhg lq olnholkrrg pd{lpl}dwlrq dqg wkh prgho sdudphwhu zdv fdofxodwhg lqgluhfwo 1 Lq wkrvh fdvhv/ wkh ydoxhv fruuhvsrqg wr wkh whfkqlfdo sdudphwhuv dv jlyhq lq wkh wklug froxpq1 48

23 71415 Frfrd dqg h{fkdqjh udwhv Wkh elyduldwh JDUFK prgho iru wkh Orqgrq dqg Qhz \run frfrd ixwxuhv jlyhv d jrrg lpsuhvvlrq ri wkh zd wkdw wkh yrodwlolw hyroyhv iurp rqh pdunhw wr dqrwkhu1 Lq rughu wr lqyhvwljdwh wkh lpsruwdqfh ri fxuuhqf ulvn khgjlqj lq wkhvh hhfwv/ rqh pd dovr lqyhvwljdwh elyduldwh prghov/ zkhuh rqh yduldeoh lv d frpprglw sulfh dqg wkh rwkhu lv wkh h{fkdqjh udwh1 Zh zloo surfhhg zlwk orjdulwkplf gdwd vhulhv iru doo yduldeohv/ dv deryh1 D vwdwlvwlfdo dqdo vlv ri wkh Orqgrq frfrd ixwxuhv lhogv wkh prgho jlyhq lq Wdeoh 61 Doo ulvn lq erwk vhulhv lv vlpso h{sodlqhg e wkh yrodwlolw ri wkh fxuuhqf h{fkdqjh udwh1 Wkh vhfrqg ulvn idfwru lv vpdoo dqg lqvljqlfdqw1 Wkh uvw ulvn idfwru dqg wkh vljqlfdqw urwdwlrq sdudphwhu txdqwli wkh zd wkdw wkh h{fkdqjh udwh yrodwlolw vsuhdgv wr frfrd sulfhv/ wr wkh h{fkdqjh udwh lwvhoi/ dqg wr wkh fryduldqfh ri wkh wzr yduldeohv1 Djdlq/ wkh +5/4, hqwu lq wkh PD pdwul{ lv vpdoo dqg h{rjhqhlw ri wkh h{fkdqjh udwh lv frquphg1 Wdeoh 6= Elyduldwh prgho iru Orqgrq frfrd ixwxuhv dqg h{fkdqjh udwh1 Qrwh= vhh Wdeoh 51 prgho hvwlpdwhg whfkqlfdo sdudphwhu ydoxh > > w 316;: 4914; w :6 w < 4195 w :155 f e S 91;;; S 9199 f e S , S 3143 f e S S : ;6 f e K K 413< f e K , K f e K 22 91:3: K

24 Iru wkh Qhz \run frfrd ixwxuhv +vhh Wdeoh 7,/ wkh vhfrqg idfwru wxuqhg rxw wr eh lqvljqlfdqw dowrjhwkhu dqg zdv wkhuhiruh rplwwhg lq rughu wr ryhufrph wkh hqvxlqj frqyhujhqfh sureohpv1 Wkh frfrd ixwxuhv sulfh vhulhv jhqhudwhv d vpdoo exw vwdwlvwlfdoo vljqlfdqw dxwrqrprxv yrodwlolw wkdw/ e frqvwuxfwlrq/ lq xhqfhv erwk yduldeohv1 Krzhyhu/ wklv hhfw lv frpsdudwlyho vpdoo dqg vkrxog eh lqwhusuhwhg zlwk fduh1 Wkh jhqhudo slfwxuh wkdw lv jlyhq e wkh Orqgrq vhulhv lv uhsurgxfhg lq wklv wklug h{shulphqw= wkh h{fkdqjh udwh lv h{rjhqrxv iru phdqv dqg yduldqfhv/ dqg wkh yrodwlolw lq frfrd sulfhv lv pdlqo h{sodlqhg e wkh lqqrydwlrqv ri wkh h{fkdqjh udwh vhulhv1 Wdeoh 7= Elyduldwh prgho iru Qhz \run frfrd ixwxuhv dqg h{fkdqjh udwh1 Qrwh= Vhh Wdeoh 51 prgho hvwlpdwhg whfkqlfdo sdudphwhu ydoxh > > w 315<< :138 w w : 418< w f e S :16;: S f e S , S 041:: f e S S : 4 514: f f f :6 4:

25 71416 Frhh ixwxuhv= Orqgrq dqg Qhz \run Iru wkh frhh ixwxuhv sulfhv zh xvh wkh urexvwd txdolw lq Orqgrq dqg dudelfd txdolw lq Qhz \run/ dv wkhvh txdolwlhv duh wkh prvw uhsuhvhqwdwlyh iru wkh wzr frpprglw h{fkdqjhv1 Lq wkh qrwdwlrq ri +7,/ j 'E{*L}R u c {*L}R / khqfh wkh uvw yduldeoh lv wkh +orjdulwkplf jurzwk udwh ri wkh, Orqgrq sulfh1 Iru wkh vwdwlvwlfdo uhvxowv/ vhh Wdeoh 81 Djdlq/ wkh lqwhufhsw yhfwru lv lqvljqli0 lfdqw dqg wklv frqupv wkh ylvxdo lpsuhvvlrq1 Dw ohdvw wzr ri wkh prylqj0 dyhudjh frh!flhqwv duh vljqlfdqw dqg ghprqvwudwh wkh vxevwdqwldo vkruw0uxq vhuldo fruuhodwlrq lq uhwxuqv1 Udqn uhvwulfwlrqv fdq eh irxqg/ krzhyhu/ lq wkh DUFK idfwruv1 Wkh uvw idfwru pdwul{ dsshduv wr ghshqg rq c rqo / l1h1/ rq wkh lqqrydwlrqv ri wkh Orqgrq ixwxuhv pdunhw1 Wkh vhfrqg idf0 wru pdwul{ dovr kdv udqn rqh dqg ghvfulehv d vhfrqg idfwru ri wkh irup EK 0 3 c n K c2 2 wkdw ghshqgv rq erwk lqqrydwlrqv exw djdlq jlyhv pruh zhljkw wr wkh Orqgrq pdunhw1 Wkh odujh urwdwlrq sdudphwhu ri vkrzv wkdw wkh wzr DUFK idfwruv lq xhqfh wkh yrodwlolw lq Orqgrq dv zhoo dv lq Qhz \run dqg dovr fdxvh qrq0wulyldo hhfwv lq wkh fryduldqfh ehwzhhq wkh pdunhwv Frhh dqg h{fkdqjh udwhv Dv lq wkh fdvh ri wkh frfrd sulfhv/ zh dovr hvwlpdwhg elyduldwh DUFK prghov iru wkh frhh sulfh vhulhv dqg wkh fxuuhqf h{fkdqjh udwh vhulhv1 Hvwlpdwlrq ri ixoo sdudphwhul}hg vwuxfwxuhv lhoghg ydulrxv sdudphwhu hvwlpdwhv zlwk yhu orz vljqlfdqfh1 Diwhu holplqdwlqj wkh lqvljqlfdqw sd0 udphwhuv iurp wkh DUFK sduw ri wkh prgho/ zh rewdlqhg d vlpsolhg prgho iru wkh Orqgrq ixwxuhv vhulhv1 Wklv prgho lv vxppdul}hg lq Wdeoh 91 Wkh uvw DUFK idfwru pdwul{ lv vlqjxodu dqg ghshqgv rq d olqhdu frpelqdwlrq ri fxuuhqf h{fkdqjh dqg frpprglw sulfh vkrfnv1 Wkh vhfrqg DUFK idfwru lv wkh h{fkdqjh udwh yrodwlolw 1 Wkh urwdwlrq sdudphwhu zdv lqvljqlfdqw dqg zdv wkhuhiruh rplwwhg1 Wkhuhiruh/ wkh uvw idfwru uhsuhvhqwv d cmrlqw* idfwru wkdw ghwhuplqhv wkh ulvn lq wkh sulfh vhulhv/ zkhuhdv wkh vhf0 rqg idfwru lv d sxuh fxuuhqf 0ulvn idfwru wkdw/ lqghshqghqwo / ghwhuplqhv wkh yrodwlolw ri wkh h{fkdqjh udwh1 Qrwh wkdw wkh hqwulhv ri wkh pdwul{ duh ri d pxfk vpdoohu vfdoh wkdq wkh DUFK idfwruv/ zklfk jlyhv d grplqdqw uroh wr wlph0fkdqjlqj ulvn1 D frpsdudeoh h{shulphqw iru wkh Qhz \run ixwxuhv vhulhv jdyh txdolwd0 wlyho vlplodu uhvxowv/ zklfk duh vxppdul}hg lq Wdeoh :1 Fxuuhqf h{fkdqjh 4;

26 Wdeoh 8= Elyduldwh prgho iru Orqgrq dqg Qhz \run frhh ixwxuhv1 Qrwh= Vhh Wdeoh 51 prgho hvwlpdwhg whfkqlfdo sdudphwhu ydoxh > > :4 w 314;< :135 w ; w < 41;5 w f 2 S S 5:1;4 f 2 S , S ;184 f 2 S :6 S 2 5: < K K 4;176 K <, K K K 2 031:< 4<

27 Wdeoh 9= Elyduldwh prgho iru Orqgrq frhh ixwxuhv dqg h{fkdqjh udwh1 Qrwh= Vhh Wdeoh 51 prgho hvwlpdwhg whfkqlfdo sdudphwhu ydoxh > < > ; w w ; w w f e S 8166; S 581;7 f e S , S 41<5 f e S S K 313 K 2 313, K K

28 udwhdqgixwxuhvsulfhvduhhyhqpruhghwdfkhgwkdqlqwkhorqgrqprgho dqg jhqhudwh wkhlu lqglylgxdo wlph0ydu lqj dqg pxwxdoo lqghshqghqw ulvn1 Wkh erwwrpolqh dsshduv wr eh wkdw khgjlqj djdlqvw fxuuhqf xfwxdwlrqv pd sod d pxfk odujhu uroh rq wkh Orqgrq pdunhw wkdq rq wkh Qhz \run pdunhw1 Wdeoh := Elyduldwh prgho iru Qhz \run frhh ixwxuhv dqg h{fkdqjh udwh1 Qrwh= Vhh Wdeoh 51 prgho hvwlpdwhg whfkqlfdo sdudphwhu ydoxh > ;5 > w w :9 w : w < f e S S 5:1<4 f e S ;, S 31<7 f e S S K 313 K 2 313, K K Iruhfdvwlqj Wkh prghov iru wkh ydulrxv frpprglw sulfhv duh frpsduhg dffruglqj wr suhglfwlrq dffxudf 1 D iruhfdvwhu ri djulfxowxudo frpprglw sulfhv lv dvvxphg wr wdujhw hlwkhu suhglfwlqj wkh ixwxuh ghyhorsphqw ri wkh sulfh vhulhv lq rughu wr rswlpl}h wkh uhwxuqv rq khu sruwirolr ru wr wdujhw ulvn suhglfwlrq/ pd eh lq rughu wr vhoo frpprglwlhv li dq deqrupdoo kljk yrodwlolw lv lqglfdwhg dqg wkhuhe wkh suredelolw ri d odujh orvv pljkw lqfuhdvh1 Lq wkh uvw fdvh/ wkh iruhfdvwhu*v wdujhw lv zhoo uhsuhvhqwhg e dq hvwlpdwh ri wkh frqglwlrqdo phdq 54

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