Volatility analysis of Brazilian soy complex regarding the world

Abstract

The aim of this study was to analyze the volatility of the Brazilian market for soybeans, soybean meal and soybean oil regarding the world, evaluating through multivariate GARCH models. The results shown by the conditional covariance, that the soybeans and soybean meal markets are characterized by dispersed volatility peaks, the first of which peaks present at the beginning of the series while the second, on the end. And, soybean oil market was stable. The soybean and soybean meal markets showed strong covariance peaks between the years 2007 and 2009. In addition, in light of the conditional correlation, it was noted that there are average interrelation between Brazilian and world markets for soybeans and strong for soybean meal market. Soybean oil market was fixed correlation. It was noted the presence of contagion effect in the series, leading to persistence of volatility and long time to dissipate this. It can be inferred that two agents were prevalent for the behavior of the Brazilian volatility in relation to the world: the rise of the Chinese economy as claimant player of commodities and the subprime crisis, which brought greater sway to the series.