Price risk connectedness in the principal olive oil markets of the EU

Abstract

This work investigates price risk connectedness in the leading olive oil markets of the EU. To this end, it relies on a flexible methodology that allows modelling price linkages across multiple markets in the physical and the product quality space and weekly prices from Spain, Italy, and Greece. The main empirical results suggest: First, price risk connectedness under extreme positive shocks is stronger than under extreme negative ones. Second, physical space is a much more important determinant of price risk spillovers relative to quality differentials. Third, the higher quality of olive oil (extra virgin) is more likely to transmit price risk to the lower quality of olive oil (virgin). Fourth, Spain (the largest supplier) plays a central role in the flow of information within the network of olive oil markets.