Integration and hedging efficiency between Brazilian and US ethanol markets

Authors

  • Daniel Henrique Dario Capitani Universidade Estadual de Campinas Faculdade de Ciências Aplicadas (FCA/UNICAMP)
  • José César Cruz Junior Professor Adjunto no Departamento de Economia da Universidade Federal de São Carlos (Ufscar - Sorocaba)
  • Julyerme Matheus Tonin Universidade Estadual de Maringá, Departamento de Economia

DOI:

https://doi.org/10.19094/contextus.v16i1.1041

Keywords:

Market integration. Time series modelling. Hedge effectiveness. Ethanol.

Abstract

This study proposes to assess the ethanol market integration between U.S. and Brazil focusing on the investigation of the existence of an international ethanol price reference. We estimate a structural vector autoregressive model with error correction (SVEC) while considering not only ethanol sugar and corn prices in Brazil and in the U.S. but also international oil prices. Then we examine simultaneous hedging strategies by considering domestic and foreign futures contracts positions in the CME, NYMEX, and BM&FBOVESPA futures exchanges. Our results highlight a weak integration between U.S. and Brazil ethanol markets, as well as low levels of hedge effectiveness in using foreign ethanol futures contracts, which suggests the absence of a price reference in the global market.

Author Biographies

Daniel Henrique Dario Capitani, Universidade Estadual de Campinas Faculdade de Ciências Aplicadas (FCA/UNICAMP)

Doutor em Economia Aplicada pela ESALQ/USP e Professor Doutor da Faculdade de Ciências Aplicadas da Universidade Estadual de Campinas (FCA/UNICAMP), atuando na área de Administração, lecionando disciplinas na graduação e pós-graduação, nas temáticas de Microeconomia, Finanças e Econometria.

José César Cruz Junior, Professor Adjunto no Departamento de Economia da Universidade Federal de São Carlos (Ufscar - Sorocaba)

Doutor em Economia Aplicada, Professor Adjunto no Departamento de Economia da Universidade Federal de São Carlos (Ufscar - Sorocaba), atua na graduação e pós graduação em Economia e Administração, lecionando disciplinas de Finanças, Economia Comportamental, Estatística e Econometria.

Julyerme Matheus Tonin, Universidade Estadual de Maringá, Departamento de Economia

Doutorando em Economia Aplicada na ESALQ/USP, Professor no Departamento de Economia da Universidade Estadual de Maringá, atua na graduação nas áreas de Finanças e Microeconomia.

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Published

2018-04-11

How to Cite

Capitani, D. H. D., Cruz Junior, J. C., & Tonin, J. M. (2018). Integration and hedging efficiency between Brazilian and US ethanol markets. Contextus - Contemporary Journal of Economics and Management, 16(1), 93–117. https://doi.org/10.19094/contextus.v16i1.1041

Issue

Vol. 16 No. 1: Jan/Apr 2018

Section

Articles

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