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The Financialization of Agriculture Products in the Chinese Domestic Market: Time-varying Correlations between Chinese Agricultural Commodity and Financial Market Dynamics

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DOI: 10.23977/agrfem.2023.060402 | Downloads: 21 | Views: 426

Author(s)

Peiran Su 1, Teruaki Nanseki 2, Yoshihiro Uenishi 2

Affiliation(s)

1 Laboratory of Agricultural and Farm Management, Department of Agricultural and Resource Economics, Graduate School of Bioresource and Bioenvironmental Sciences, Kyushu University, Fukuoka, 819–0395, Japan
2 Department of Agricultural and Resource Economics, Faculty of Agriculture, Kyushu University, Fukuoka, 819–0395, Japan

Corresponding Author

Peiran Su

ABSTRACT

The financialization of agriculture products is the result of a dramatic increase in commodity investing popularity over the last decade, which has resulted in an unprecedented infusion of institutional capital into commodity futures markets. This study analyses the dynamic relationship between financial markets and domestic agricultural commodity markets in China. The autoregressive moving-average dynamic conditional correlation generalized autoregressive conditional heteroskedasticity (ARMA-DCC GARCH) model is used to identify whether the financialization of agriculture products exists in Chinese domestic markets (corn, soybean No. 1, soybean No. 2, soybean meal, and soybean oil) from 2006 to 2020. The results show that dynamic, long-term positive volatile time-varying relationships exist between markets over the last 14 years. The prices of soybean No. 1 and soybean oil appear to have been more affected by the contagion effect of the financial crisis of 2008 than the prices of soybean No. 2 and corn. These results show that the financialization of agriculture products exists in the Chinese domestic market.

KEYWORDS

Agricultural commodity, ARMA-DCC GARCH model, stock market

CITE THIS PAPER

Peiran Su, Teruaki Nanseki, Yoshihiro Uenishi, The Financialization of Agriculture Products in the Chinese Domestic Market: Time-varying Correlations between Chinese Agricultural Commodity and Financial Market Dynamics. Agricultural & Forestry Economics and Management (2023) Vol. 6: 7-18. DOI: http://dx.doi.org/10.23977/agrfem.2023.060402.

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