Izaan Azyan Abdul Jamil (2022) Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis. Doctoral thesis, Universiti Malaysia Sabah.
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Abstract
This study aims to investigate the factors underlying the open gap that occurs daily in the Futures Crude Palm Oil (FCPO) market. This is crucial, as it directly impacts the profit and loss in market participants’ portfolios. This study explored both causality and volatility empirical modelling in order to describe this daily phenomenon. The Autoregression Distributed Lags (ARDL) model was employed to investigate the causality between the closing price of Soybean Oil Futures (SBOF), Brent Crude Oil Futures (Brent), spot price of MYR against USD (EXR), and Kuala Lumpur Composite Index (KLCI), with the opening price of FCPO. This study then examined volatility spillovers by employing the Generalized Autoregressive Conditional Heteroscedasticity in Mean (GARCH-M) Model in order to investigate spillovers from SBOF, Brent, EXR, and KLCI to FCPO markets. Daily data spanning from 3rd January 2006 until 29th May 2020 was used, and was divided into five samples, namely full sample, Food Crisis 2006-2008, Global Financial Crisis, Oil Crash 2014-2016, and Trade Wars between USA and China. The results from ARDL showed that the closing prices of SBOF, Brent, and KLCI were statistically significant and caused changes in the opening prices of FCPO. Meanwhile, for GARCH-M, intraday activities from SBOF were spilled and caused a negative influence on the opening price of FCPO. The findings obtained explain the factors behind the open gap occurring almost every day in the FCPO market. In addition, this study also discovered the information extracted from the opening price and the importance of time zone differences in trading, especially in ways that intraday activities in foreign markets are able to negatively influence the opening price of domestic markets. Thus, the results reported in this study will place an open gap in the FCPO market under the spotlight, especially in assisting market participants’ portfolios, and suggestions to the Bursa Malaysia Derivatives in improving their products.
| Item Type: | Thesis (Doctoral) |
|---|---|
| Keyword: | FCPO, Open gap, Opening price, Daily phenomenon, Causality, Volatility spillover, Time zone differences, Market participant |
| Subjects: | T Technology > TP Chemical technology > TP1-1185 Chemical technology > TP670-699 Oils, fats, and waxes |
| Department: | FACULTY > Faculty of Business, Economics and Accounting |
| Depositing User: | DG MASNIAH AHMAD - |
| Date Deposited: | 22 Oct 2024 14:24 |
| Last Modified: | 22 Oct 2024 14:24 |
| URI: | https://eprints.ums.edu.my/id/eprint/41291 |
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