Extreme risk spillovers between crude palm oil prices and exchange rates
This study is the first attempt to examine the extreme risk spillovers between Malaysian crude palm oil (CPO) and foreign exchange currencies of the three largest CPO importers: India, the European Union and China throughout the global financial crisis. Using daily data of three currencies, CPO spot...
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my.um.eprints.268992022-04-13T07:04:17Z http://eprints.um.edu.my/26899/ Extreme risk spillovers between crude palm oil prices and exchange rates Go, You-How Lau, Wee-Yeap HC Economic History and Conditions HG Finance This study is the first attempt to examine the extreme risk spillovers between Malaysian crude palm oil (CPO) and foreign exchange currencies of the three largest CPO importers: India, the European Union and China throughout the global financial crisis. Using daily data of three currencies, CPO spot and futures from 2000 to 2018, our results show: First, before the crisis, the unexpected change in foreign exchange rates is the primary driver of risk spillover to the CPO market. Second, during the crisis, the extreme movement of CPO spot returns is dominant in the Malaysian exchange rates relative to the euro. Third, after the crisis, the spillover flows from the CPO market to the foreign exchange market. Overall, our findings show the importance of CPO pricing dynamics in mitigating foreign exchange risk over the crisis period. This paper contributes to the extant literature by recognizing the effect of risk spillover on the targeted foreign exchange rate for portfolio allocation. Elsevier Science Inc 2021-11 Article PeerReviewed Go, You-How and Lau, Wee-Yeap (2021) Extreme risk spillovers between crude palm oil prices and exchange rates. North American Journal of Economics and Finance, 58. ISSN 1062-9408, DOI https://doi.org/10.1016/j.najef.2021.101513 <https://doi.org/10.1016/j.najef.2021.101513>. 10.1016/j.najef.2021.101513 |
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HC Economic History and Conditions HG Finance Go, You-How Lau, Wee-Yeap Extreme risk spillovers between crude palm oil prices and exchange rates |
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This study is the first attempt to examine the extreme risk spillovers between Malaysian crude palm oil (CPO) and foreign exchange currencies of the three largest CPO importers: India, the European Union and China throughout the global financial crisis. Using daily data of three currencies, CPO spot and futures from 2000 to 2018, our results show: First, before the crisis, the unexpected change in foreign exchange rates is the primary driver of risk spillover to the CPO market. Second, during the crisis, the extreme movement of CPO spot returns is dominant in the Malaysian exchange rates relative to the euro. Third, after the crisis, the spillover flows from the CPO market to the foreign exchange market. Overall, our findings show the importance of CPO pricing dynamics in mitigating foreign exchange risk over the crisis period. This paper contributes to the extant literature by recognizing the effect of risk spillover on the targeted foreign exchange rate for portfolio allocation. |
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Go, You-How Lau, Wee-Yeap |
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Go, You-How Lau, Wee-Yeap |
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Go, You-How |
title |
Extreme risk spillovers between crude palm oil prices and exchange rates |
title_short |
Extreme risk spillovers between crude palm oil prices and exchange rates |
title_full |
Extreme risk spillovers between crude palm oil prices and exchange rates |
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Extreme risk spillovers between crude palm oil prices and exchange rates |
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Extreme risk spillovers between crude palm oil prices and exchange rates |
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extreme risk spillovers between crude palm oil prices and exchange rates |
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Elsevier Science Inc |
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2021 |
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http://eprints.um.edu.my/26899/ |
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