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Modelling the Asymmetric Volatility in Hog Prices in Taiwan: The Impact of Joining the WTO

Chang, Chia-Lin and Huang, Biing-Wen and Chen, Meng-Gu and McAleer, Michael (2009) Modelling the Asymmetric Volatility in Hog Prices in Taiwan: The Impact of Joining the WTO. [Working Paper or Technical Report] (Unpublished)

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Abstract

The hog industry, where prices are determined according to an auction system, is of vital importance to the agricultural industry in Taiwan by providing significant
production and employment. In particular, there were significant impacts on daily hog prices in the periods before, during and after joining the WTO, which we will refer to as periods of anticipation, adjustment and settlement. The purpose of the paper is to model
the growth rates and volatility in daily hog prices in Taiwan from 23 March 1999 to 30 June 2007, which enables an analysis of the effects of joining the WTO. The paper
provides a novel application of financial volatility models to agricultural finance. The empirical results have significant implications for risk management and policy
considerations in the agricultural industry in Taiwan, especially when significant structural changes, such as joining the WTO, are concerned. The three sub-samples
relating to the period before, during and after joining the WTO display significantly different volatility persistence, namely symmetry, asymmetry but not leverage, and
leverage, respectively, whereby negative shocks increase volatility but positive shocks of a similar magnitude decrease volatility.

Item Type:Working Paper or Technical Report
Additional Information:JEL Classifications: Q14, G18,G32
Uncontrolled Keywords:Hog prices, Joining the WTO, Conditional volatility models, Asymmetry, Leverage, Moment conditions.
Subjects:Social sciences > Economics > Commerce
Series Name:Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2009
Number:14
ID Code:8694
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Deposited On:24 Mar 2009 12:07
Last Modified:06 Feb 2014 08:12

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