TY - EJOUR AB - This study investigates the exposure of dairy firm stock prices to the prices of dairy product futures, in terms of returns and volatility, from May 2013 to April 2018. Stock price returns are regressed against an index of the futures price returns to four dairy products – milk, cheese, butter and dry whey – to isolate the effects of the dairy futures price returns. Dairy product futures price returns are found to be significant in the regression in the first three years of the sample period, with a mean coefficient of 0.024. Using the Diebold-Yilmaz volatility spillover method of forecast error variance decomposition, we show that the volatility of the four dairy product futures accounted for an average of 5.49 per cent of the volatility of dairy stock prices. These results suggest that the prices of dairy firms have minimal exposure to dairy product futures prices. This has implications for dairy firms and investors, who seek to understand volatility and returns in the dairy products and the stocks they trade in, and for policymakers, who seek to control or mitigate undesirable dairy product price volatility. AU - Leung, Henry AU - Furfaro, Frank DA - 2020-07-01 DA - 2020-07-01 DO - 10.22004/ag.econ.338504 DO - doi EP - 654 EP - 632 ID - 338504 IS - 3 JF - Australian Journal of Agricultural and Resource Economics KW - Industrial Organization KW - comovement KW - equity KW - returns L1 - https://ageconsearch.umn.edu/record/338504/files/ajar12373.pdf L2 - https://ageconsearch.umn.edu/record/338504/files/ajar12373.pdf L4 - https://ageconsearch.umn.edu/record/338504/files/ajar12373.pdf LA - eng LA - English LK - https://ageconsearch.umn.edu/record/338504/files/ajar12373.pdf N2 - This study investigates the exposure of dairy firm stock prices to the prices of dairy product futures, in terms of returns and volatility, from May 2013 to April 2018. Stock price returns are regressed against an index of the futures price returns to four dairy products – milk, cheese, butter and dry whey – to isolate the effects of the dairy futures price returns. Dairy product futures price returns are found to be significant in the regression in the first three years of the sample period, with a mean coefficient of 0.024. Using the Diebold-Yilmaz volatility spillover method of forecast error variance decomposition, we show that the volatility of the four dairy product futures accounted for an average of 5.49 per cent of the volatility of dairy stock prices. These results suggest that the prices of dairy firms have minimal exposure to dairy product futures prices. This has implications for dairy firms and investors, who seek to understand volatility and returns in the dairy products and the stocks they trade in, and for policymakers, who seek to control or mitigate undesirable dairy product price volatility. PY - 2020-07-01 PY - 2020-07-01 SN - 1467-8489 SP - 632 T1 - Comovement of dairy product futures and firm value: returns and volatility TI - Comovement of dairy product futures and firm value: returns and volatility UR - https://ageconsearch.umn.edu/record/338504/files/ajar12373.pdf VL - 64 Y1 - 2020-07-01 T2 - Australian Journal of Agricultural and Resource Economics ER -