Volatility spillover between oil and agricultural commodity markets

By Ş. Nazlıoğlu, C. Erdem, Ugur Soytas. 2013

477 citations recorded by the source corpus.

This study examines volatility transmission between oil and selected agricultural commodity prices (wheat, corn, soybeans, and sugar). We apply the newly developed causality in variance test and impulse response functions to daily data from 01 January 1986 to 21 March 2011. In order to identify the impact of the food price crisis, the data are divided into two sub-periods: the pre-crisis period (01 January 1986 to 31 December 2005) and the post-crisis period (01 January 2006–21 March 2011). The variance causality test shows that while there is no risk transmission between oil and agricultural commodity markets in the pre-crisis period, oil market volatility spills on the agricultural markets —with the exception of sugar —in the post-crisis period. The impulse response analysis also indicates that a shock to oil price volatility is transmitted to agricultural markets only in the post-crisis period. This paper thereby shows that the dynamics of volatility transmission changes significantly following the food price crisis. After the crisis, risk transmission emerges as another dimension of the dynamic interrelationships between energy and agricultural markets.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/1f1ffcda1d2d9d558f8ce89ec23b0805c2ec9713

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Citations in the corpus

Volatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries (2017, unknown): “18 Daily frequency is therefore more suitable for estimating volatility spillovers (Mensi et al. 2015), while it is often preferred in similar recent studies (Mollick and Assefa, 2013; Nazlioglu et al. 2013; Basher and Sardosky, 2016).”
Exploring the time-frequency connectedness and network among crude oil and agriculture commodities V1 (2019, background): “Only several studies focus on volatility spillovers etween oil and agriculture commodities (Serra, 2011; Ji and Fan, 012; Nazlioglu et al., 2013; Jebabli et al., 2014).”
Forecasting realized volatility of agricultural commodity futures with infinite Hidden Markov HAR models (2019, unknown): “…literature, forecasting volatility has gained interest, oftentimes from a risk-2 management perspective (Klein & Walther, 2016, Ji & Fan, 2016) or in terms of quantifying spillovers between markets (Nazlioglu et al., 2013, Todorova et al., 2014, Ji et al., 2018, Klein, 2018, Ma et al., 2019).”
Oil prices and financial stress: A volatility spillover analysis (2015, background): “Nevertheless, it also appears that oil prices and financial stress are dominated by persistent long-run volatility (Nazlioglu et al., 2013).”
Dynamic spillover effects among crude oil, precious metal, and agricultural commodity futures markets (2017, methodology): “Nazlioglu et al. (2013) employ a variance impulse response function (VIRF) to identify the structure of the volatility transmission mechanism between oil and agricultural commodities (i.e. corn, soybeans, wheat, and sugar) before and during the food crisis of 2006–2008, using causality in variance…”