COCOA PRICES RELATIONSHIPS ON LONDON AND NEW YORK MARKETS AND IMPLICATIONS FOR TRADERS
This study investigates the relationships existing between spot and futures prices of cocoa on and between London and New York markets, using daily prices from 2004 to 2008. Unit root test using Augmented Dickey-Fuller and Phillip Perron tests show non-stationarity (at the levels), but the four vari...
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The Faculty of Agriculture Obafemi Awolowo University, Ile-Ife, Nigeria.
2020
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| Online adgang: | https://ija.oauife.edu.ng/index.php/ija/article/view/379 |
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| author | TIJANI, A. A. KASSALI, R. |
| author_facet | TIJANI, A. A. KASSALI, R. |
| author_sort | TIJANI, A. A. |
| collection | OJS |
| description | This study investigates the relationships existing between spot and futures prices of cocoa on and between London and New York markets, using daily prices from 2004 to 2008. Unit root test using Augmented Dickey-Fuller and Phillip Perron tests show non-stationarity (at the levels), but the four variables become stationary after first differencing. Johansen co-integration test reveals that a long-run equilibrium relationship exists between all prices of cocoa with at least one co-integrating equation. The Granger causality test indicates the existence of at least one directional causal relationship between spot and future prices on each market and between markets. The implication is that cocoa futures contract is a useful vehicle for reducing overall market price risk faced by cash market participants selling at the world market price. Hence, cocoa exporters in Nigeria who largely trade on the London market should enter into futures cocoa contract in order to maximize profit at minimum price risk associated with the existing marketing deregulation. |
| format | Online |
| id | oai:ojs2.ija.oauife.edu.ng:article-379 |
| institution | My University |
| publishDate | 2020 |
| publisher | The Faculty of Agriculture Obafemi Awolowo University, Ile-Ife, Nigeria. |
| record_format | ojs |
| spelling | oai:ojs2.ija.oauife.edu.ng:article-3792020-09-07T14:41:06Z COCOA PRICES RELATIONSHIPS ON LONDON AND NEW YORK MARKETS AND IMPLICATIONS FOR TRADERS TIJANI, A. A. KASSALI, R. Cocoa, Spot price, Price risk, Co-integration, Futures trading This study investigates the relationships existing between spot and futures prices of cocoa on and between London and New York markets, using daily prices from 2004 to 2008. Unit root test using Augmented Dickey-Fuller and Phillip Perron tests show non-stationarity (at the levels), but the four variables become stationary after first differencing. Johansen co-integration test reveals that a long-run equilibrium relationship exists between all prices of cocoa with at least one co-integrating equation. The Granger causality test indicates the existence of at least one directional causal relationship between spot and future prices on each market and between markets. The implication is that cocoa futures contract is a useful vehicle for reducing overall market price risk faced by cash market participants selling at the world market price. Hence, cocoa exporters in Nigeria who largely trade on the London market should enter into futures cocoa contract in order to maximize profit at minimum price risk associated with the existing marketing deregulation. The Faculty of Agriculture Obafemi Awolowo University, Ile-Ife, Nigeria. 2020-09-07 info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion Peer-reviewed Article https://ija.oauife.edu.ng/index.php/ija/article/view/379 Ife Journal of Agriculture; Vol. 24 No. 1 (2009): Ife Journal of Agriculture; 65-78 0331-6351 Copyright (c) 2020 Ife Journal of Agriculture |
| spellingShingle | Cocoa, Spot price, Price risk, Co-integration, Futures trading TIJANI, A. A. KASSALI, R. COCOA PRICES RELATIONSHIPS ON LONDON AND NEW YORK MARKETS AND IMPLICATIONS FOR TRADERS |
| title | COCOA PRICES RELATIONSHIPS ON LONDON AND NEW YORK MARKETS AND IMPLICATIONS FOR TRADERS |
| title_full | COCOA PRICES RELATIONSHIPS ON LONDON AND NEW YORK MARKETS AND IMPLICATIONS FOR TRADERS |
| title_fullStr | COCOA PRICES RELATIONSHIPS ON LONDON AND NEW YORK MARKETS AND IMPLICATIONS FOR TRADERS |
| title_full_unstemmed | COCOA PRICES RELATIONSHIPS ON LONDON AND NEW YORK MARKETS AND IMPLICATIONS FOR TRADERS |
| title_short | COCOA PRICES RELATIONSHIPS ON LONDON AND NEW YORK MARKETS AND IMPLICATIONS FOR TRADERS |
| title_sort | cocoa prices relationships on london and new york markets and implications for traders |
| topic | Cocoa, Spot price, Price risk, Co-integration, Futures trading |
| topic_facet | Cocoa, Spot price, Price risk, Co-integration, Futures trading |
| url | https://ija.oauife.edu.ng/index.php/ija/article/view/379 |
| work_keys_str_mv | AT tijaniaa cocoapricesrelationshipsonlondonandnewyorkmarketsandimplicationsfortraders AT kassalir cocoapricesrelationshipsonlondonandnewyorkmarketsandimplicationsfortraders |