Can agricultural and precious metal commodities diversify and hedge extreme downside and upside oil market risk? An extreme quantile approach - Archive ouverte HAL Accéder directement au contenu
Article Dans Une Revue Resources Policy Année : 2019

Can agricultural and precious metal commodities diversify and hedge extreme downside and upside oil market risk? An extreme quantile approach

(1) , (2) , (3) , (4, 5)
1
2
3
4
5

Résumé

The cost-effectiveness measures for production, processing, and transportation adopted by wheat, rice, and corn farmers, as well as the price fluctuations of gold and silver, doubtlessly depend on the downside and upside price trends of global economic factors such as the oil market. This dependence between oil and agricultural commodities motivates an analysis of interdependence and spillover influence in extreme oil market scenarios. By means of an extreme quantile approach, this study models the return distribution of oil in relation to some of the most traded agricultural and precious metal commodities. We find that extreme lower quantiles of oil returns have a positive effect on the lower quantiles of gold, silver, and rice returns. These effects are more significant using daily-frequency data, while for weekly and monthly frequencies, the effect is less significant. The decrease in oil returns during a bearish oil market will cause a decrease in precious metal and rice returns; therefore, these cannot be used to hedge the downside risk of oil investments, especially in the short term. These commodities might only serve as a diversification strategy for oil investments. The lower quantiles of oil returns have either no effect, or a negative effect, on the lower quantiles of wheat and corn, making them suitable hedges for extreme downturns in oil prices.
Fichier non déposé

Dates et versions

hal-02159274 , version 1 (18-06-2019)

Identifiants

Citer

Jose Areola Hernandez, Syed Jawad Hussain Shahzad, Gazi Salah Uddin, Sang Hoon Kang. Can agricultural and precious metal commodities diversify and hedge extreme downside and upside oil market risk? An extreme quantile approach. Resources Policy, 2019, 62, pp.588-601. ⟨10.1016/j.resourpol.2018.11.007⟩. ⟨hal-02159274⟩
43 Consultations
0 Téléchargements

Altmetric

Partager

Gmail Facebook Twitter LinkedIn More