Analyzing Dairy Market Price Co-movement and Risk Transmission Using a Copula-GARCH Model
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Abstract
To characterize time-varying dependence and abrupt structural changes in commodity-market linkages, this paper develops a segmented modeling framework combining the Bai-Perron breakpoint test with a dynamic Copula-GARCH model. The proposed framework overcomes the limitations of conventional models in identifying risk “jumps” by explicitly detecting structural breakpoints in market dependence. Empirical results demonstrate high sensitivity to structural mutations, with an average correlation-coefficient shift of ∆ρ = 0.2. Raw milk and international whole milk powder are identified as major risk sources, showing significant asymmetric tail dependence in which negative shocks transmit more strongly than positive shocks. Incorporating carbon-emission intensity further indicates that low-carbon production can weaken extreme risk linkages, reducing lower-tail dependence by 0.10 to 0.18 compared with highemission groups. The study provides a quantitative basis for collaborative stabilization strategies and green riskmanagement frameworks in dairy value chains, supporting operational resilience and sustainable development under nonlinear and asymmetric market-risk transmission.
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