ISSN: 0041-3216

ISSN: 0041-3216 (Online), 0041-3216 (Print)
Volume 95 Number 2
Research Papers
Comparing the volatility of the international prices of cocoa, coffee and oil
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This paper examined the volatility of the international prices of two major beverage commodities, cocoa and coffee, measured by the moving coefficient of variation of their price series and comparing this volatility to that of the international price of oil. The analysis was for the period January 2005 to May 2013. The comparisons of the mean volatility of the price series utilized bootstrapped standard errors, in tests of the differences between the means. The paper also determined correlations of the prices and the volatilities for the three commodities. Granger causality tests were also carried out to determine particularly whether the oil price volatility Granger-causes the volatilities of the prices of the two beverages. The results found that there was no significant difference between the mean volatility of the prices of cocoa and coffee, but that the mean volatility of the price of oil was significantly higher than those of the two beverage commodities. There was a high positive correlation between the prices of the two beverages (0.723) and also a high correlation between the price of oil and the price of coffee (0.708). However, the correlation between the price of cocoa and the price of oil was moderately low and positive (0.563). The correlations between the volatilities of the price series were low in all cases. The paper also found that the volatility of the price of oil Granger-caused the volatility of the price of coffee but not cocoa. The study demonstrated the volatility of the prices of cocoa and coffee and the results supported the well-established position of the highly volatile nature of the price of oil and its possible causal effect on the volatility of the price of coffee.
Keywords: Cocoa, coffee and oil prices, price volatility, bootstrapping