Price Discovery Measures in Agricultural Economics

by Evgenia Pavlova
Doctoral thesis
Date of Examination:2018-02-22
Date of issue:2022-06-14
Advisor:Prof. Dr. Stephan von Cramon-Taubadel
Referee:Prof. Dr. Thomas Kneib
Referee:Prof. Dr. Bernhard Brümmer
Persistent Address: http://dx.doi.org/10.53846/goediss-9265

 

 

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Abstract

English

The present dissertationis devoted to the issue of price discovery in agricultural markets. Price discovery is considered one of the central functions of financial markets and is usually analyzed empirically for highly homogeneous assets traded on these markets. We investigate whether this approach can provide useful insights into the pricing of agricultural commodities. We follow classical approaches for the measurement of price discovery: the permanent-transitory (PT) approach proposed by Gonzalo and Granger (1995); the information shares (IS) approach proposed by Hasbrouck (1995); and the information leadership share (ILS) proposed by Putnins (2013) that is a combination of both. These approaches are based on the vector error-correction model (VECM) that separates long-run price movements from short-run market microstructure effects. We also provide insight in other methods that are based on the variance decomposition and assess them in regard to the agricultural markets analysis. We analyse the differencies between argicultural commodities and financial assets that are relevant for deriving and calculating the above measures and propose respective modifications. We apply our methodology to the analysis of weekly pork meat prices in four EU countries (Germany, Netherlands, Belgium and France) for the period 1987-2013 and perform pairwise price discovery analysis using different measures that were introduced in the dissertation.
Keywords: price discovery; agricultural economics; variance decomposition
 
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