Two Essays on Market Interdependencies, Price Volatility and Volatility Spillovers in the Western Canadian Feed Barley, U.S. Corn and Alberta Cattle Markets

• Author / Creator

  Zhen, Miao

• Over the last decade, Alberta cattle markets have experienced several extreme events, including the 2003 Canadian bovine spongiform encephalopathy (BSE) crisis and recent episodes of feed price surges. These events may have affected the price volatility of Alberta cattle and its interdependencies with the feed grain markets. This thesis consists of two essays that aim to assess market interdependencies, price volatility and volatility spillovers in the western Canadian feed barley, U.S. corn and Alberta cattle industries.
  The first essay employed the asymmetric generalized dynamic conditional correlation (AG-DCC) generalized autoregressive conditional heteroskedasticity (GARCH) framework to quantify volatility changes and market interdependencies among relevant markets. The model results suggested that the fed cattle price volatility was higher than the feeder cattle price volatility during the BSE crisis, while the opposite was true during non-BSE periods. Furthermore, no evidence was found to prove that the cattle and feed barley price volatility changed during food price surges. Although strong market interdependencies were found throughout the cattle supply chain, these relationships were weakened at the beginning of the BSE crisis. In contrast, weak interdependencies between the cattle and the feed grain markets were found. Moreover, the market relationships exhibited only small changes during the BSE crisis and feed price surges.
  
  The second essay assesses price volatility spillovers in the Alberta cattle supply chain and between the cattle and feed grain markets using the bivariate asymmetric BEKK-GARCH model. Although bidirectional price volatility spillovers were found throughout the Alberta cattle supply chain, spillovers between cattle and feed grain price volatility were found exclusively between the Alberta lighter feeder cattle and Lethbridge barley markets. Furthermore, model results indicated strong volatility spillovers from the U.S. corn market to the barley market. Interestingly, volatility spillovers were not found between the Alberta fed cattle and barley markets. However, barley price volatility might still be transmitted to the fed cattle market through feeder cattle price volatility.
  This thesis contributes to the relatively scarce literature on price volatility and market linkages in the western Canadian agricultural sector, providing useful information for agricultural producers managing market risks and for policy makers designing efficient price stabilization programs.

• Subjects / Keywords

  • Price volatility
  • Agricultural market
  • Volatility spillovers
  • Market interdependency

• Graduation date

  Spring 2015

• Type of Item

  Thesis

• Degree

  Master of Science

• DOI

  https://doi.org/10.7939/R3Q372

• License

  This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.