Modelling the volatility of rubber prices in ASEAN-3

Norlee Ramli, Abu Hassan Shaari Md Noor, Tamat Sarmidi, Fathin Faizah Said, Abdul Hafizh Mohd Azam

Research output: Contribution to journalArticle

Abstract

Rubber industry has always been vulnerable to the price volatility of standard rubber, which subverts the benefits of rubber production to the local economy. The objectives of this article are to study the volatility of rubber prices and its causality in three countries of main rubber producer namely Malaysia, Thailand and Indonesia as well as synthetic rubber and crude oil. Univariate Generalized Autoregressive Conditional Heteroscedastic (GARCH)-Family models such as an ordinary GARCH, GARCH-M, EGARCH and TGARCH are applied to determine the best model for volatility evaluation. Granger causality test is performed to observe the short-run relationship amongst ASEAN-3. The results denote that conditional variance is determined by past innovation and past conditional variance (volatility). The significance of leverage effect with negative coefficient value shows the existence of asymmetric effect at the same magnitude for Malaysia rubber prices, synthetic rubber prices and crude oil prices. This study indicates the evidence of bidirectional short-run Granger causality using VAR between the prices where any shocks occur at one country will give some impacts to the other countries.

Original languageEnglish
Pages (from-to)1-18
Number of pages18
JournalInternational Journal of Business and Society
Volume20
Issue number1
Publication statusPublished - 1 Jan 2019

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Modeling
Rubber
Short-run
Conditional variance
Malaysia
Crude oil
Leverage effect
Granger causality
Asymmetric effects
Price volatility
Local economy
Coefficients
Thailand
Indonesia
Innovation
Granger causality test
Evaluation
Industry
Crude oil price
Causality

Keywords

  • Granger causality (VAR)
  • Natural rubber price
  • Univariate GARCH
  • Volatility

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Cite this

Modelling the volatility of rubber prices in ASEAN-3. / Ramli, Norlee; Md Noor, Abu Hassan Shaari; Sarmidi, Tamat; Said, Fathin Faizah; Azam, Abdul Hafizh Mohd.

In: International Journal of Business and Society, Vol. 20, No. 1, 01.01.2019, p. 1-18.

Research output: Contribution to journalArticle

Ramli, Norlee ; Md Noor, Abu Hassan Shaari ; Sarmidi, Tamat ; Said, Fathin Faizah ; Azam, Abdul Hafizh Mohd. / Modelling the volatility of rubber prices in ASEAN-3. In: International Journal of Business and Society. 2019 ; Vol. 20, No. 1. pp. 1-18.
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