Coffee price returns networks: Insights from a high-dimensional CoVaR-copula analysis

Thomas M. Menino Convention & Exhibition Center 

This paper analyses daily coffee price returns over a two-decade period for 17 varieties across the United States, Germany, and France. We examine the coffee price relationships considering coffee quality, origin, and trade location, using a high-dimensional CoVaR-copula network approach. By exploring CoVaR connectedness, we assess patterns of risk co-movement and potential spillovers, particularly during periods of market stress. Our findings suggest that higher-quality coffees tend to exhibit stronger within-market connections, with distinct clusters emerging across different markets. The United States appears as a central node within the risk network, with notable spillover effects from both Germany and France – likely reflecting its position as the world's largest coffee importer. Additionally, trade location is associated with varying connectedness patterns, with marked differences observed across the US, German, and French markets.

Coffee prices

Chemical composition

Tail risk contagion

CoVaR

Copula

Elastic-Net-VAR 

Business and Economic Statistics Section