Modelling conditional correlations in the volatility of Asian rubber spot and futures returns
At the current time, Asia is the most important market in terms of production for world rubber and consumption. The world prices of rubber are not only subject to the changing in demands, but also to the speculation of the future markets. It is acknowledged that Japan and Singapore are the major futures markets for rubber and Thailand is one of the world's biggest producers of rubber. Since the rubber price is influenced by the external markets, attention should paid in great detail to the relationships between the markets in Thailand, Japan and Singapore. There is a need to empirically examine the natural rubber RSS3 in the market relationship context of these three countries. The analysis is conducted on a variety of multivariate GARCH framework. The results indicate that the constant conditional correlations from CCC models of Bollerslev (1990) are medium and low. The results from VARMA-GARCG of Ling and McAleer (2003) and VARMA-AGARCH of McAleer et al. (2008) suggest the presence of volatility spillovers and asymmetric effects of positive and negative return shocks on the conditional volatility. Finally, DCC models of Engle (2002) presents that the conditional correlations can vary dramatically over time. In general, the dynamic volatilities returns in rubber spot and futures returns could be either independent or interdependent over time.
|Keywords||Conditional correlation, Multivariate conditional volatility, Rubber futures|
|JEL||Time-Series Models; Dynamic Quantile Regressions (jel C22), Time-Series Models; Dynamic Quantile Regressions (jel C32), Financial Forecasting (jel G17), Financing Policy; Capital and Ownership Structure (jel G32), Agricultural Finance (jel Q14)|
|Conference||18th World IMACS Congress and International Congress on Modelling and Simulation: Interfacing Modelling and Simulation with Mathematical and Computational Sciences, MODSIM 2009|
Tansuchat, R, Khamkaew, T, & McAleer, M.J. (2020). Modelling conditional correlations in the volatility of Asian rubber spot and futures returns. In 18th World IMACS Congress and MODSIM 2009 - International Congress on Modelling and Simulation: Interfacing Modelling and Simulation with Mathematical and Computational Sciences, Proceedings (pp. 1363–1369). Retrieved from http://hdl.handle.net/1765/127842