Determinants of futures price volatility of storable agricultural commodities: The case of cotton

Abstract

This thesis empirically analyzes how the volatility of cotton futures is affected by the factors hypothesized in the literature to impact the volatility of agricultural futures prices.Parameter estimates of a GARCH (1,1) model reveal presence of strong ARCH and GARCH effects and significant volatility persistence. Stocks-to-use ratio, price level, market concentration in long positions and market concentration in short positions are identified to be statistically significant determinants of cotton futures price volatility.