Tail dependence risk and spillovers between oil and food prices.

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Publisher: Elsevier Advanced Technology Publications
Document Type: Report; Brief article
Length: 368 words

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Keywords World food prices; Oil prices; Tail dependence; Spillovers; CoVaR Highlights * Nonlinear dependence dynamics and tail risk spillovers between oil and food prices are examined. * Static and dynamic bivariate copulas, Value-at-Risk (VaR) and conditional VaR (CoVaR) methods are used. * Lower and upper tail dependence is observed between oil prices and the prices of cereals, vegetable oil, and sugar. * We identify upside and downside asymmetric risk spillovers from individual food commodities to oil and vice versa. * Oil prices most strongly affect by sugar and vegetable oil prices (downside and upside). Abstract We examine the nonlinear dependence dynamics and downside and upside risk spillovers between oil prices and world food prices captured by a world food price index and its subcategories of dairy, cereals, vegetable oil, and sugar. We draw our empirical results using static and dynamic bivariate copulas, Value-at-Risk (VaR) and conditional VaR (CoVaR) methods. Our empirical findings reveal that oil prices and aggregate food prices, as measured by the world food price index, independently move during market upturns and downturns. However, lower and upper tail dependence is observed between oil prices and cereals, vegetable oil, and sugar prices. We also identify upside and downside asymmetric risk spillovers from individual food commodities to oil and from oil to food commodities. Oil prices most strongly affect sugar and vegetable oil prices (downside and upside) whereas oil prices are most strongly impacted in the downside and upside by vegetable oil and sugar prices, respectively. The implications of the results are discussed. Author Affiliation: (a) Department of Management Sciences, COMSATS University Islamabad, Attock Campus, Pakistan (b) Independent Researcher (c) Montpellier Business School, University of Montpellier, Montpellier Research in Management, France (d) South Ural State University, Russia (e) Department of Economics, Pusan National University, Busan, Republic of Korea * Corresponding author at: 2, Busandaehak-ro 63beon-gil, Geumjeong-gu, Busan 46241, Republic of Korea. Article History: Received 28 May 2020; Revised 13 December 2020; Accepted 28 January 2021 (footnote)â This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2020S1A5B8103268). Byline: Waqas Hanif [waqashanif085@gmail.com] (a), Jose Areola Hernandez [jose.arreolah.finance@gmail.com] (b), Syed Jawad Hussain Shahzad [j.syed@montpellier-bs.com] (c,d), Seong-Min Yoon [smyoon@pusan.ac.kr] (e)

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Gale Document Number: GALE|A663230314