Volatility and risk persistence in black pepper prices: A garch analysis of garbled and ungarbled grades in the Kochi market

Abstract

Black pepper prices have shown pronounced volatility due to global competition, climatic shocks and structural changes in production and trade. This study analyses and compares price volatility in Malabar Garbled (GBP) and Ungarbled Black Pepper (UBP) using monthly Kochi market prices from January 2001 to December 2024. Log price returns were examined through inter- and intra-annual volatility indices and a GARCH (1, 1) model to capture time-varying and persistent risk. Both grades exhibited substantial price instability, with UBP consistently recording higher inter- and intra-annual volatility, reflecting greater exposure to seasonal and structural shocks. GARCH results revealed extremely high volatility persistence, particularly for UBP, implying slow dissipation of price shocks. This distinction indicated that price shocks in the ungarbled segment have long-lasting effects on volatility compared with the GBP. The findings suggested that quality standardization through garbling provides limited risk mitigation and highlighted the need for grade-specific price risk management and policy interventions.