Preliminary evidence on relationships between agricultural commodities futures prices, spot prices and oil prices using reverse regressions

Abstract

The focus of this research was on hypothesized relationships between agricultural commodities futures prices, respective spot prices and oil prices. The research uses reverse regressions to test for empirical relationships between variables. This article analyses the possible relationships taking into account intertemporal effects, temporal aggregation (daily and weekly), alternative time series model specifications (GARCH, E-GARCH) and assumptions on the distribution of residuals. Preliminary evidence indicates the significance of the hypothesized relationships for some cases. As evidence is by no means conclusive, directions for ongoing research are indicated.

Keywords:

• commodities
• prices
• temporal aggregation
• time series
• nonnormality

JEL Classification:

• Q14
• G1
• C2

Acknowledgements

The authors gratefully acknowledge comments and insights provided by Professor David Peel, Lancaster University Management School, editor, Applied Economics Letters, and an anonymous referee.