Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis

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 o...

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Main Author:	Izaan Azyan Abdul Jamil
Format:	Thesis
Language:	English English
Published:	2022
Subjects:	TP670-699 Oils fats and waxes
Online Access:	https://eprints.ums.edu.my/id/eprint/41291/1/24%20PAGES.pdf https://eprints.ums.edu.my/id/eprint/41291/2/FULLTEXT.pdf
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id	my-ums-ep.41291
record_format	uketd_dc
spelling	my-ums-ep.412912024-10-22T06:24:30Z Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis 2022 Izaan Azyan Abdul Jamil TP670-699 Oils, fats, and waxes 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. 2022 Thesis https://eprints.ums.edu.my/id/eprint/41291/ https://eprints.ums.edu.my/id/eprint/41291/1/24%20PAGES.pdf text en public https://eprints.ums.edu.my/id/eprint/41291/2/FULLTEXT.pdf text en validuser dphil doctoral Universiti Malaysia Sabah Faculty Of Business, Economics, And Accountancy
institution	Universiti Malaysia Sabah
collection	UMS Institutional Repository
language	English English
topic	TP670-699 Oils fats and waxes
spellingShingle	TP670-699 Oils fats and waxes Izaan Azyan Abdul Jamil Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis
description	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.
format	Thesis
qualification_name	Doctor of Philosophy (PhD.)
qualification_level	Doctorate
author	Izaan Azyan Abdul Jamil
author_facet	Izaan Azyan Abdul Jamil
author_sort	Izaan Azyan Abdul Jamil
title	Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis
title_short	Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis
title_full	Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis
title_fullStr	Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis
title_full_unstemmed	Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis
title_sort	empirical modeling of futures crude palm oil in malaysia: an open gap analysis
granting_institution	Universiti Malaysia Sabah
granting_department	Faculty Of Business, Economics, And Accountancy
publishDate	2022
url	https://eprints.ums.edu.my/id/eprint/41291/1/24%20PAGES.pdf https://eprints.ums.edu.my/id/eprint/41291/2/FULLTEXT.pdf
_version_	1818611389893181440

Empirical modeling of futures crude palm oil in Malaysia: An open gap analysis

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