U.S. grain commodity futures price volatility: Does trade policy uncertainty matter?
•We focus on three U.S. major grain commodity futures markets.•We explore the predictive performance of trade policy uncertainty on grain markets.•The model involving TPU owns higher predictive power than the benchmark model. The outbreak and continuation of the COVID-19 pandemic have affected the t...
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Published in | Finance research letters Vol. 48; p. 103028 |
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Main Authors | , |
Format | Journal Article |
Language | English |
Published |
Elsevier Inc
01.08.2022
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Subjects | |
Online Access | Get full text |
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Summary: | •We focus on three U.S. major grain commodity futures markets.•We explore the predictive performance of trade policy uncertainty on grain markets.•The model involving TPU owns higher predictive power than the benchmark model.
The outbreak and continuation of the COVID-19 pandemic have affected the trade policies of various countries and influenced global food security. This paper aims to use U.S. major grain commodity futures price and trade policy uncertainty (TPU) index data to examine the impact of TPU on the volatility of U.S. grain futures prices under the GARCH-MIDAS framework. The in-sample estimates confirm the impact of TPU on the volatility of US grain commodity futures prices. Out-of-sample testing further reveals that considering TPU could improve predictions of future price fluctuations for different grain commodities. Finally, we also consider other uncertainty indices. Since the grain market is often used as a tool to hedge financial risks, this article can provide some advice for investors in times of policy instability and especially trade policy uncertainty. |
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ISSN: | 1544-6123 1544-6131 |
DOI: | 10.1016/j.frl.2022.103028 |