Abstract
This study examines the dependence structure of extreme realization of growth rate between palm oil prices and factors affecting, which are soybean oil and crude oil prices. We employ the Bivariate Extreme Value methods for daily palm oil, soybean oil and crude oil prices ranging from July 1988 to January 2012. The results provide that the growth rate of palm oil and soybean oil prices has some dependence in extremes, but the growth rate of palm oil and crude oil prices has fairly weak dependence or even independence in extremes. Therefore, the authors of this study hoped that these findings not only have made a contribution to our understanding of what drives palm oil price movement of soybean oil and change in crude oil prices, but also for the practitioner who want to devise an updated model to enhance a further comprehension of the prices that drive these article of trade.
Highlights
In the consumption sector of oil and fats, palm oil is by far one of the highly well-known energy crop leaders in terms of production
The results provide that the growth rate of palm oil and soybean oil prices has some dependence in extremes, but the growth rate of palm oil and crude oil prices has fairly weak dependence or even independence in extremes
The authors of this study hoped that these findings have made a contribution to our understanding of what drives palm oil price movement of soybean oil and change in crude oil prices, and for the practitioner who want to devise an updated model to enhance a further comprehension of the prices that drive these article of trade
Summary
In the consumption sector of oil and fats, palm oil is by far one of the highly well-known energy crop leaders in terms of production. With the rise in an increasing population, rapid economic growth and an elevated production of biodiesel, the worldwide demand for palm oil has brought about a changing shift towards the prices marked in palm oil. Such a rise in the factors will always lead to uncertainty or angst that makes decision making to sway by the extreme side such as hoarding the goods on part of the consumers while leaving scarce items for others (Khaneman, 2011). We attempt to investigate the relationship between palm oil prices and the two factors (soybean oil and crude oil prices) with a daily data. Note: The Palm oil price of this paper is Palm Oil Futures 1-Pos, MYR, The Crude oil price of this paper is Brent Crude Futures 1-Pos, USD
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