Learning from actual Price behavior(Part2)

There are several vegetable markets in Japan, we will see how the price in each market moves and how drastically it fluctuates.We have picked two vegetabls here to study.

Radish : All market price linked to Tokyo Ohta vegetable market

Tokyo Ohta market price is index for others, so we have compared supplied volume among big 19 markets.You will see Tokyo Ohta is the biggest one by far which more than 20% of radish has been shipped in.We also find that 40% of radish is supplied in Metropolitan area (Tokyo(4markets) and Yokohama ) and 25% is into Kansai area (Osaka(2markets) and Kyoto).


We take historical market price data for 5 markets to compare in this char below to see that price in each moves in the almost same way.We also calculate correclation between Tokyo Ohta market and other 18 markets to find that all are highly correlated.It seems we can focus on Tokyo Ohata price when analyzing market price going forward.

Reference Data:http://www.maff.go.jp/j/tokei/syohi/syunbetu.html

Carrot : price volatility comparision with Equity

There are lot’s of different markets besides vegetables, such as fish,flowers and even finacial products.Now, we think the Financial markets are the most transparent one because almost all trades are done on the trading board which everyone can see quoted price by both buyers(bid-price) and sellers(offer-price).However sellers do not have to hit the bid-price within the day unless it meets the expectation, which is quite different from vegetable market.We pick Nikkei 225 index for comparison.

We have a good indicator to explain how big price fluctuates for different products, which is standard deviation for rate of change.We have computed both standard deviation and mean for the rate of daily price for both.
Carrot : The standard deviation is 6% with its mean 0.5%.
Nikkei225 : The standard deviation is 0.6% with its mean 0.04%.
We could say bigger price risk products has bigger standard deviation and you can also confirm how often carrot prices moves a lot in the graph below.
So, we can say carrot price is alomost six times as risky as the one of Nikkei 225, which also causes farmers business to be difficult.


Reference Data:http://www.e-stat.go.jp/SG1/estat/OtherList.do?bid=000000680001&cycode=1

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