Measurement of volatility spillovers and asymmetric connectedness on commodity and equity markets Tereza Malířová Master's Thesis, IES FSV UK, July 2017 We study volatility spillovers among commodity and equity markets by employing a recently developed approach based on realized measures and forecast error variance decomposition invariant to the variable ordering from vector-autoregressions. This enables us to measure total, directional and net volatility spillovers as well as the asymmetry of responses to positive and negative shocks. We exploit high-frequency data on the prices of Crude oil, Corn, Cotton and Gold futures, and the S&P 500 Index and use a sample which spans from January 2002 to December 2015 to cover the entire period around the global financial crisis of 2008. Our empirical analysis reveals that on average, the volatility shocks related to other markets account for around one fifth of the volatility forecast error variance. We find that shocks to the stock markets play the most important role as the S&P 500 Index dominates all commodities in terms of general volatility spillover transmission. Our results further suggest that volatility spillovers across the analyzed assets were rather limited before the global financial crisis, which then boosted the connectedness between commodity and stock...

Magister Economicae - MEcon / Pre-democratic South Africa was highly regulated by the apartheid government with the black small-scale farming community actively marginalised. Following the deregulation of the South African agricultural market came the opening up of the market to accommodate these small-scale farmers and also the introduction of South African Futures Exchange. South Africa has done well in terms of development of ICT over the past years, making it a country with characteristics of both first and third world countries. This study aims to assess the agricultural commodity exchange market and how small-scale farmers may participate more actively in the market. This study finds that though South Africa has world class ICT infrastructure this has not made it easier for small-scale farmers to enter the agricultural market and value chain. The study finds that there is little or no participation by small-scale farmers in South African Futures Exchange. It finds that mobile phones and applications may be the way forward in the efforts to ensure their participation in the commodity exchange market through provision of services such as price discovery and price risk management as is the function of South African Futures Exchange. It is also found that there is need to invest in high value agricultural products in order to benefit more from commodity exchanges.

Cette thèse étudie le rôle joué par les investisseurs financiers sur les marchés des matières premières, connu sous le nom de financiarisation des matières premières. Elle est constituée d’une partie théorique et d’une autre empirique. Les recherches menées visent à étudier la participation des investisseurs, détenant des portefeuilles d’actions, aux marchés à terme de matières premières, pour des raisons de diversification. De plus, cette diversification peut être obtenue en investissant dans un panier de produits de base. Le premier chapitre analyse théoriquement l’interaction entre le marché des matières premières et celui des actions. Le deuxième chapitre étudie empiriquement l’impact du choix des investisseurs financiers sur la prime de risque des contrats à terme sur les matières premières. Il s’intéresse principalement à trois produits de base : pétrole brut (WTI), fioul pour chauffage et gaz naturel. Le troisième chapitre étudie théoriquement l’intégration de deux marchés de matières premières. Nous clarifions certaines considérations concernant l’effet de la financiarisation sur lesquelles la littérature existante reste hésitante. Nous démontrons le pouvoir d’influence qu’exercent les investisseurs sur le marché des matières premières. Toutefois, ceci dépend de la nature de la position de l’investisseur sur le marché à terme. De manière générale, la financiarisation entraîne la hausse des prix spot, des prix des contrats à terme et des niveaux des stocks. Nous montrons aussi que les investisseurs représentent un canal de transmission entre les marchés de matières premières. Leurs effets étendus se limitent à la corrélation croisée des marchés de matières premières. Enfin, nous montrons que les rendements des marchés d’actions sont devenus un déterminant de la prime de risque des contrats à terme après la crise financière de 2008. Cet effet des rendements des actions est indifférent entre les maturités courtes et longues. / This dissertation studies the role of financial investors on commodity markets, which is referred as financialization of commodity. The content of the dissertation splits to theoretical and empirical work. The implemented researches are motivated by the participation of investors, who own stock portfolios, in commodity futures markets for diversification reasons. Furthermore, that diversification is likely achieved by investing in a basket of commodities. The first chapter investigates, theoretically, the interaction between commodity and stock markets. The second chapter studies, empirically, the impact of financial investors on the commodities futures risk premium. It focuses on studying three commodities: crude oil (WTI), heating oil and natural gas. The third chapter examines, theoretically, the integration between two commodity markets. We clarify the hesitating of the previous literature in finding evidences of the impact of financialization. We confirm the influential power of investment in commodity market. However, that depends on the financial investors positions taken in the futures market. Generally, financialization increases the spot prices, the futures prices and inventory levels. We find, also, that investors are a transmission channel between commodity markets. Their effects spread out restricted to the cross commodity markets correlation. Finally, stock market returns became effective determinant of the futures risk premium after 2008 financial crisis. Also, the effect of the stock returns indifferent between short and long maturities.

[pt] Os mercados de commodities tornaram-se uma nova alternativa para investidores nos últimos quinze anos, em um processo conhecido como financeirização dos mercados de commodities. Vários estudos têm explicado as razões deste fenômeno, porém esta é uma questão ainda pouco estudada na literatura de economia agrícola e energética no Brasil. Como a financeirização do mercado de commodities mudou a dinâmica dos preços ao longo dos anos? Esta tese aplica modelos não lineares para entender se a especulação causou os movimentos de preços nos mercados de commodities agrícolas, bem como para investigar a descoberta de preços no mercado brasileiro ao se testar os mecanismos de transmissão dos preços internacionais de energia e commdities agrícolas aos preços brasileiros de etanol e gasolina. Procuramos investigar com os mesmos modelos não lineares os efeitos de transbordamento dos mercados globais de futuros para os preços à vista locais. Por fim, analisa-se o aumento da liquidez nos mercados de commodities, desenvolvemos para tanto uma nova medida para compreender o grau de ambiguidade dos preços de 12 commodities agrícolas. Apesar dos testes econométricos, os resultados foram inconclusivos sobre o papel da especulação no impacto dos retornos dos preços das commodities. Existe um nexo entre os preços internacionais do petróleo e do etanol brasileiro, e os preços globais das commodities aumentaram os efeitos de contágio nos mercados spot brasileiros. Finalmente, a financeirização dos mercados de commodities aumentou a liquidez do mercado medida pelo grau de ambiguidade. Esta tese contribui para o campo ao aplicar abordagens econométricas robustas e inovadoras, bem como ao evidenciar como o price discovery e o risk-sharing afetam a dinâmica dos preços das commodities. / [en] Commodity markets have become a new investment alternative for portfolio investors over the last fifteen years, in a process known as the financialization of commodity markets. Several studies have explained the reasons for this phenomenon (e.g., speculation and increase in biofuels production), leading to a question largely understudied in agricultural and energy economics literature. How has the financialization of the commodities market changed the price dynamic over the years? This thesis applies nonlinear models to understand whether the speculation caused the price movements in the agricultural commodity markets; investigates the price discovery in the Brazilian market by analyzing the transmission of international energy and feedstocks prices to Brazilian ethanol and gasoline prices; and investigates the spillover effects from global futures markets to local spot prices. In addition, it analyzes the increased liquidity in the commodity markets by developing a new measurement to gauge the degree of ambiguity for 12 agricultural commodities prices. Despite the robust econometric tests performed, the findings were inconclusive on the role of speculation in impacting the price returns of commodities. It also found that there exists a nexus between international oil and Brazilian ethanol prices, and global commodities prices have increased the spillover effects on the Brazilian spot markets. Finally, the financialization of commodity markets has increased the liquidity in the market as measured by the degree of ambiguity. This thesis contributes to the field not only by applying more robust, novel econometric approaches but also by evidencing how information discovery and risk-sharing affect the commodity price dynamics.

Land ist eine kritische Ressource für nachhaltige Entwicklung, doch ihre relative Knappheit erfordert Abwägungen, die für eine Gestaltung von nachhaltiger und gerechter Politik identifiziert werden müssen. Diese ist empirisch herausfordernd, da Landressourcen in verschiedenen abgelegenen lokalen Bedingungen genutzt werden und über voneinander abhängigen globalen Märkten gehandelt werden. Diese Dissertation trägt mit drei empirischen Studien zu dieser Identifizierungsbemühung bei. Das erste Kapitel hinterfragt das Potenzial von Preisanreizen zur Eindämmung der Entwaldung für Ölpalmplantagen in Indonesien. Die Ergebnisse deuten darauf hin, dass machbare marktbasierte Eingriffe in der vorgelagerten Palmöl-Lieferkette die nicht regulierte Entwaldung effektiv und gerecht reduzieren könnten, die ansonsten dem globalen Bedarf folgen würde. Das zweite Kapitel untersucht die Ausbreitungsmechanismen, durch die Schocks auf globalen Landressourcenmärkten indirekt zu Landnutzungsänderungen führen. Die Ergebnisse bestätigen einen globalen Verdrängungsmechanismus und etablieren einen kausalen Zusammenhang zwischen den Renewable Fuel Standards (RFS) in den Vereinigten Staaten und der Ausweitung bedeutender landwirtschaftlicher treibender Kräfte der Entwaldung in pan-tropischen Gebieten. Das dritte Kapitel erforscht die Auswirkungen der RFS auf internationale Unterernährung. Die Ergebnisse zeigen, dass der disruptive Effekt der Nachfrage-Schocks durch die RFS dank ihrer Vorhersehbarkeit abgemildert wird. Dennoch werden Bedenken bezüglich der Ernährungssicherheit in Ländern erhoben, in denen die Lebensmittelversorgung von Importen abhängt, insbesondere im Falle unerwarteter Schocks auf den globalen Märkten für Landressourcen. / Land is a critical resource for sustainable development, but its relative scarcity implies trade-offs that need to be identified to design sustainable and fair policy. This task is challenging empirically, because land resources are used in a variety of remote local conditions, and they are traded through interdependent global markets. This thesis contributes three empirical studies to this identification effort. The first chapter questions the potential of price incentives to mitigate deforestation for oil palm plantations in Indonesia. The results indicate that feasible market interventions upstream the palm oil supply chain could effectively and equitably mitigate unregulated deforestation otherwise left to follow global demand. The second chapter tests the propagation mechanisms through which shocks on global markets for land resources indirectly cause land use change. The results corroborate a global scale displacement mechanism specifically, and they establish a causal link between the Renewable Fuel Standards (RFS) in the United States and the expansion of major agricultural drivers of deforestation in pan-tropical areas. The third chapter explores the impact of the RFS on international undernourishment. The results indicate that the disruptive effect of the demand shocks by the RFS is mitigated by their predictability. Yet, this raises concerns about food security in countries where calorific supply depends on imports, in the case of unexpected shocks on global markets for land resources.