Volatility persistence and inventory effect in grain futures markets: evidence from a recursive model

  • Rodrigo Lanna Franco da Silveira University of Campinas
  • Leandro dos Santos Maciel Federal University of São Paulo
  • Fabio L. Mattos University of Nebraska
  • Rosangela Ballini University of Campinas
Keywords: Price volatility, Volatility persistence, Inventory effect, Grain futures markets

Abstract

The purpose of this paper is to investigate the volatility persistence and the inventory effect in grain futures markets during the period of 1959–2014. The innovative nature of this study lies in the evaluation of rolling estimates, using a recursive univariate TARCH(1,1)-in-mean volatility model. The daily evolution of volatility persistence and the inventory effect on corn and soybean futures contracts is analyzed using a rolling window of 1008 observations over four years. In general, the results suggest that the conditional volatility in both markets is highly persistent. There is also evidence of inventory, time-to-maturity, and seasonality effects on the volatility dynamics of corn and soybeans. In addition, the findings point to a lower short-run volatility persistence in recent years, which caused a slight decrease in long-run volatility persistence and the half-life period in both markets.

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Published
2017-12-01
How to Cite
Silveira, R., Maciel, L., Mattos, F., & Ballini, R. (2017). Volatility persistence and inventory effect in grain futures markets: evidence from a recursive model. Revista De Administração, 52(4), 403-418. https://doi.org/10.1016/j.rausp.2017.08.003
Section
Finance & Accounting