<p>We show how fat tails in agricultural commodity returns arise endogenously from productivity shocks in a standard macroeconomic model. Using nearly ninety years of data, we show that the eight agricultural commodities in our sample exhibit fat-tailed return distributions. Statistical tests confirm the heavy-tailedness of price spikes for agricultural commodities. We apply extreme value theory to estimate the size and likelihood of price spikes in agricultural commodities. Back-testing verifies the validity of our risk assessment methodology.</p>

doi.org/10.1007/s10687-020-00401-3, hdl.handle.net/1765/136171
Erasmus School of Economics

Maarten R.C. van Oordt, Philip A. Stork, & CG (Casper) de Vries. (2021). On agricultural commodities’ extreme price risk. Extremes, 24(3), 531–563. doi:10.1007/s10687-020-00401-3