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Exploring the effect of climate risk on agricultural and food stock prices: Fresh evidence from EMD-Based variable-lag transfer entropy analysis
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Abedin Abedin
Journal of Environmental Management, Volume: 326, Start page: 116789
Swansea University Author: Abedin Abedin
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DOI (Published version): 10.1016/j.jenvman.2022.116789
Abstract
Climate has traditionally played an important role in the development of countries, owing to its inherent relationship with agricultural output and pricing. This study explores one such association between the most well-known climate anomaly, the El Niño34 Southern Oscillation, and international com...
| Published in: | Journal of Environmental Management |
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| ISSN: | 0301-4797 |
| Published: |
Elsevier BV
2023
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| Online Access: |
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa64226 |
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| Abstract: |
Climate has traditionally played an important role in the development of countries, owing to its inherent relationship with agricultural output and pricing. This study explores one such association between the most well-known climate anomaly, the El Niño34 Southern Oscillation, and international commodity prices of agriculture and food indexes. This study addresses the potentially causal effect of El Niño34 on international agricultural and food stock prices. To do so, we develop a novel approach: the empirical mode decomposition variable-lag transfer entropy (EMD-VL transfer entropy) by combining the variable-lag transfer entropy framework and the empirical mode decomposition. The evidence reveals the following major results. First, climate shocks affect global agricultural stock prices in the short-term. Second, significant transfer entropy from El Niño34 to food index appeared at mid- and long-term business cycles. Third, unidirectional causal effect from climate shocks to agricultural and food stock prices is more intense in the short business cycle attesting to the impact of climate shocks on the food market, which is especially visible in the short-term horizon. Finally, our proposed method exceeds the traditional variable-lag transfer entropy by detecting such causal interplay at various business cycles, which is useful for investors and policymakers. |
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| Keywords: |
Variable lag transfer entropy, Empirical mode decomposition, El Niño34, Food index, Agricultural index |
| College: |
Faculty of Humanities and Social Sciences |
| Start Page: |
116789 |