Template-type: ReDIF-Paper 1.0
Author-Name: Shawkat Hammoudeh
Author-Workplace-Name: Lebow College of Business, Drexel University, USA
Author-Name: Soodabeh Sarafrazi
Author-Workplace-Name: Lebow College of Business, Drexel University, USA
Author-Name: Chia-Lin Chang
Author-Email: changchialin@nchu.edu.tw
Author-Person: pch286
Author-Workplace-Name: Department of Applied Economics, Department of Finance, National Chung Hsing University
	Taichung, Taiwan.
Author-Name: Michael McAleer
Author-Person: pmc90 
Author-Workplace-Name: Econometrisch Instituut (Econometric Institute), Faculteit der Economische 
	Wetenschappen (Erasmus School of Economics), Erasmus Universiteit, Tinbergen Instituut (Tinbergen Institute).
Title: The Dynamics of Energy-Grain Prices with Open Interest
Abstract: This paper examines the short- and long-run daily relationships for a grain-energy nexus that includes 
	the prices of corn, crude oil, ethanol, gasoline, soybeans, and sugar, and their open interest. The 
	empirical results demonstrate the presence of these relationships in this nexus, and underscore the 
	importance of ethanol and soybeans in all these relationships. In particular, ethanol and be considered 
	as a catalyst in this nexus because of its significance as a loading factor, a long-run error corrector 
	and a short-run adjuster. Ethanol leads all commodities in the price discovery process in the long run. 
	The negative cross-price open interest effects suggest that there is a money outflow from all commodities 
	in response to increases in open interest positions in the corn futures markets, indicating that active 
	arbitrage activity takes place in those markets. On the other hand, an increase in the soybean open 
	interest contributes to fund inflows in the corn futures market and the other futures markets, leading 
	to more speculative activities in these markets. In connection with open interest, the ethanol market 
	fails because of its thin market. Finally, it is interesting to note that the long-run equilibrium 
	(cointegrating relationship), speeds of adjustment and open interest across markets have strengthened 
	significantly during the 2009-2011 economic recovery period, compared with the full and 2007-2009 Great 
	Recession periods.
Classification-JEL: E43, Q11, Q13.
Keywords: Energy-grain price nexus, open interest, futures prices, ethanol, crude oil, gasoline, corn, soybean, 
	sugar, arbitrage, speculation.
Note: For financial support, the third author wishes to thank the National Science Council, Taiwan, and the fourth 
	author acknowledges the Australian Research Council, National Science Council, Taiwan, and the Japan 
	Society for the Promotion of Science.
Length: 35 pages 
Creation-Date: 2011 
Number: 2011-18
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1118.txt
File-URL: https://eprints.ucm.es/id/eprint/12808/1/1118.pdf
File-Format: Application/pdf
File-Function: May 2011
Handle: RePEc:ucm:doicae:1118