Dynamic connectedness between energy markets and the Brazilian cash market: An empirical analysis pre‐ and post‐COVID‐19-Reference-Cited by-同舟云学术

Dynamic connectedness between energy markets and the Brazilian cash market: An empirical analysis pre‐ and post‐COVID‐19

Published:2023-09-27 Issue:1 Volume:44 Page:27-56
ISSN:0270-7314
Container-title:Journal of Futures Markets
language:en
Short-container-title:Journal of Futures Markets

Author:

Palazzi Rafael Baptista¹,Assaf Ata²³,Klotzle Marcelo Cabus⁴^ORCID

Affiliation:

1. Department of Finance FGV‐EAESP Sao Paulo School of Business Administration São Paulo SP Brazil

2. Department of Business Administration, University of Balamand Faculty of Business and Management Tripoli Lebanon

3. Department of Economics and Finance Cyprus International Institute of Management (CIIM) Nicosia Cyprus

4. IAG Business School, Department of Finance Pontifical Catholic University of Rio de Janeiro (PUC‐Rio) Rio de Janeiro Brazil

Abstract

AbstractBrazil's significant commodity production is internationally recognized, yet the absence of a mature futures market exposes it to price risks and international shocks. This study explores the dynamic connectedness between commodity futures and the Brazilian cash markets, using a time‐varying parameter vector autoregressive model. We also assess COVID‐19's impact on this connectedness. We find a significant influence of oil prices on Brazilian ethanol prices, and particularly emphasize the Heating Oil spillover effect on ethanol in the post‐COVID‐19 era. We also note the ascension of Brazilian soybean spot markets' international significance since 2017, amplifying their role in global grain price discovery. Finally, by computing hedge ratios and effectiveness between commodity futures contracts and Brazilian spot prices, our study reveals soybean cash price as the most effective hedge. These insights deepen comprehension of connectedness within Brazilian commodity markets, thereby guiding investors and policymakers in strategic energy policy decisions.

Publisher

Wiley

Subject

Economics and Econometrics,Finance,General Business, Management and Accounting,Accounting

Link

https://onlinelibrary.wiley.com/doi/pdf/10.1002/fut.22463

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