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Price Volatility and Conditional Correlation of Livestock and Poultry Vertical Market Levels in Iran: Using Constant and Time varying Conditional Correlation Models

Journal: Agricultural Economics (Vol.10, No. 3)

Publication Date:

Authors : ; ; ;

Page : 19-46

Keywords : volatility; time varying conditional correlation; price spillover; vertical market levels; price information flow;

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To study price volatility and vertical market integration in the livestock and poultry vertical market levels, the multivariate volatility models, including constant (CCC) and dynamic (DCC and VCC) conditional correlation models were estimated using monthly time series data of broiler feed, chicken, broiler, hay, sheep, calf, beef and mutton prices from April 1997 to March 2014. Estimating the conditional correlation models showed that the constant conditional correlation assumption is a major restriction for the variables under our investigation. Except for retail and wholesale price correlations in poultry market which is constant over time the dynamic conditional correlations are significantly different from the constant conditional correlations, so that the dynamic conditional correlation has experienced strong fluctuations in all cases. The results suggest that in the livestock and poultry markets price information's transmit more from the input level to the retail and wholesale levels than the reverse direction. Moreover, the correlation between the wholesale and retail market levels was larger which means stronger price relations between these two market levels. Estimated volatility models indicate that shocks and news rather than past volatility have greater impact on the current volatility in Iranian livestock and poultry markets. This indicates the necessity of news management in Iran.

Last modified: 2018-08-20 15:54:43