Crude Oil Volatility Transmission Across Food Commodity Markets: A Multivariate BEKK-GARCH Approach:
01 Aug 2021-Journal of Emerging Market Finance (SAGE PublicationsSage India: New Delhi, India)-Vol. 20, Iss: 2, pp 131-164
TL;DR: In this paper, the authors examined the time-varying price risk transmission in the nexus between crude oil and agricultural commodity prices in the context of non-grain-based biofuel producing country.
Abstract: This study examines the time-varying price risk transmission in the nexus between crude oil and agricultural commodity prices in the context of non-grain-based biofuel producing country. Analysis o...
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06 Oct 2021
TL;DR: In this paper, the authors investigated the volatility impact of crude oil and gold on interest rates and contributed to the existing literature with its findings, but there is no evidence of volatility spillover from gold and crude oil on the interest rates.
Abstract: Crude oil, gold and interest rates are some of the key indicators of the health of domestic as well as global economy. The purpose of the study is to find the shock volatility and price volatility effects of gold and crude oil market on interest rates in India.,This study finds the mutual and directional association of the volatility of gold, crude oil and interest rates in India. The bi-variate GARCH models (Diagonal VEC GARCH and BEKK GARCH) are applied on the sample data of gold price, crude oil price and yield (interest rate) gathered from November 30, 2015 to November 16, 2020 (weekly basis) to investigate the volatility association including the volatility spillover effect in the three markets.,The main findings of the study focus on having a long-term conditional correlation between gold and interest rates, but there is no evidence of volatility spillover from gold and crude oil on the interest rates. The findings of the study are of great importance especially to the policymakers, as they state that the fluctuations in prices of gold and crude oil do not adversely impact the interest rates in India. Therefore, the fluctuations in prices of gold and crude may generally impact the economy, but it has nothing to do with interest rate in particular. This implies that domestic and foreign investments in the country will not be affected by gold and crude oil that are largely driven by interest rates in the country.,Gold and crude oil are two very important commodities that have their importance not only for domestic affairs but also for international business. They veritably influence the economy including forex exchange for any nation. In addition to this, the researchers believe the findings will provide insights to policymakers, stakeholders and investors.,Gold and crude oil undoubtedly influence the exchange rates but their impact on the interest rates in an economy is not definite and remains ambiguous owing to the mixed findings of the studies. The lack of studies related to the impact of gold and crude oil on the interest rates, despite them being essentials for the health of any economy is the main motivation of this study. This study is novel as it investigates the volatility impact of crude oil and gold on interest rates and contributes to the existing literature with its findings.
8 citations
TL;DR: In this article , the authors examined the volatility spillover and lead-lag relationship between the Chicago Board Options Exchange volatility index (VIX) and the major agricultural future markets before and during the Coronavirus disease 2019 (COVID-19) outbreak.
Abstract:
Purpose
The purpose of this paper is to examine the volatility spillover and lead-lag relationship between the Chicago Board Options Exchange volatility index (VIX) and the major agricultural future markets before and during the Coronavirus disease 2019 (COVID-19) outbreak.
Design/methodology/approach
The methods used were the vector autoregression-Baba, Engle, Kraft and Kroner-generalized autoregressive conditional heteroskedasticity method, the Wald test and wavelet transform method.
Findings
The findings indicate that prior to the COVID-19 outbreak, there was a two-way volatility spillover impact between the majority of the sample markets. In comparison, volatility transmission between the VIX index and the agricultural future market was significantly lower following the COVID-19 outbreak, the authors observed greater coherence at higher frequencies than at lower frequencies, implying that the interdependence between the two VIX indices and the agricultural future market was stronger over a longer time-frequency domain and the VIX’s signalling effect on various agricultural future prices after the COVID-19 outbreak was significantly lower.
Originality/value
The authors conducted the first comprehensive investigation of the VIX’s correlation with major agricultural futures, especially during COVID-19. The findings contribute to a better understanding of the risk transmission mechanism between the VIX and major agricultural commodities futures contracts. And our findings have significant implications for investors and portfolio managers, as well as for policymakers who are concerned about the price of agricultural futures.
5 citations
TL;DR: In this paper, the authors investigated the interlinkage of gold markets and Vietnamese asset classes at multiple investment horizons using a hybrid wavelet-based VAR-GARCH-BEKK approach.
Abstract: This study investigates the interlinkage of gold markets and Vietnamese asset classes at multiple investment horizons using a hybrid wavelet-based VAR-GARCH-BEKK approach. The findings show that th...
4 citations
TL;DR: In this paper , the dependence and the directional predictability between eight major energy price returns, using the Cross-Quantilogram (CQ) and the Partial CQ (PCQ) analysis, were analyzed.
3 citations
TL;DR: In this article , the authors examined the integration of environmental, social and governance (ESG) equity indices among emerging markets, that is, Brazil, Russia, India, China and South Africa (BRICS).
Abstract: The current research examines the integration of environmental, social and governance (ESG) equity indices among emerging markets, that is, Brazil, Russia, India, China and South Africa (BRICS). Daily data of the ESG equity index from 1 January 2012 to 31 December 2021 are collected from Morgan Stanley Capital International (MSCI). The article employs Johansen’s co-integration test for long-term co-movement and Granger causality tests for causality among ESG equity indices. The study also used the BEKK model to investigate the volatility spillover among the ESG indices. Further, the study also calculated hedge ratios and portfolio weights. The results indicate that none of the ESG indices is co-integrated and short-run bi-directional causality exists across the four ESG indices. All the indices are significantly affected by their past shock and volatility. However, India’s ESG index is influenced by the past shock of South Africa and the past volatility of China. The findings suggest that the flow of information between the ESG indices of emerging countries is not developed yet to the point where they may be integrated into the BRICS countries. As a result, these sustainable equity indices must be promoted even more to become fully integrated.
3 citations
References
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TL;DR: In this paper, the authors explore empirical evidence about the quantitative importance of supply, demand, and market shocks for price changes in international food commodity markets and distinguish between root, conditional, and internal drivers of price changes using three empirical models: (1) a price spike model in which monthly food price returns (spikes) are estimated against oil prices, supply and demand shocks, and excessive speculative activity; (2) a volatility model, in which annualized monthly variability of food prices is estimated against the same set of variables plus a financial crisis index; and (3) a trigger
285 citations
"Crude Oil Volatility Transmission A..." refers background in this paper
...…al., 2008; Baffes, 2007; Ciaian & Kancs, 2011; Gilbert, 2010; Harri et al., 2009; Hassouneh et al., 2012; Kristoufek et al., 2012; Pala, 2013; Reboredo, 2012; Tadesse et al., 2014; Wang et al., Thenmozhi and Maurya 135 2014), few researchers have confirmed volatility transmission between markets....
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TL;DR: This paper examined the price relationship through time of the primary agricultural commodities, exchange rates, and oil prices, and found that commodity prices are linked to oil for corn, cotton, and soybeans, but not for wheat, and that exchange rates do play a role in the linkage of prices over time.
Abstract: Exchange rates have long been thought to have an important impact on the export and import of goods and services, and, thus, exchange rates are expected to influence the price of those products that are traded. At the same time, energy impacts commodity production in some very important ways. The use of chemical and petroleum derived inputs has increased in agriculture over time; the prices of these critical inputs, then, would be expected to alter supply, and, therefore, the prices of commodities using these inputs. Also, agricultural commodities have been increasingly used to produce energy, thereby leading to an expectation of a linkage between energy and commodity markets. In this paper, we examine the price relationship through time of the primary agricultural commodities, exchange rates, and oil prices. Using overlapping time periods, we examine the cointegration relationship between prices to determine changes in the strength of the linkage between markets through time. In general, we find that commodity prices are linked to oil for corn, cotton, and soybeans, but not for wheat, and that exchange rates do play a role in the linkage of prices over time.
262 citations
"Crude Oil Volatility Transmission A..." refers result in this paper
...While most of the prior studies examine the price level interdependencies (Abbott et al., 2008; Baffes, 2007; Ciaian & Kancs, 2011; Gilbert, 2010; Harri et al., 2009; Hassouneh et al., 2012; Kristoufek et al., 2012; Pala, 2013; Reboredo, 2012; Tadesse et al., 2014; Wang et al., Thenmozhi and Maurya…...
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TL;DR: In this paper, the authors investigated the relationship between the crude oil price and the global grain prices for corn, soybean, and wheat and found that the change in each grain price is significantly influenced by the changes in the crudeoil price and other grain prices during the period extending from the 3rd week in 2005 to the 20th week in 2008.
257 citations
"Crude Oil Volatility Transmission A..." refers background in this paper
...Chen et al. (2010) addressed the issue of volatility spillover between global corn, soybean, wheat and West Texas Intermediate (WTI) crude oil futures prices and conclude that volatility transmits from crude oil and other grains to grain market....
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...There are limited studies that examine the volatility transmission in crude oil and agricultural commodity futures prices in the United States (Du & McPhail, 2012; Du et al., 2011) and in the World market (Chen et al., 2010)....
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TL;DR: The authors examined the impacts of three types of OPEC news announcements on volatility spillovers and persistence in international energy and cereal commodity markets, and showed that the persistence of volatility decreases for the crude oil and heating oil (gasoline) returns after accounting for the OPEC announcements in these multivariate GARCH models.
214 citations
"Crude Oil Volatility Transmission A..." refers background in this paper
...Mensi et al. (2014) examine the return and volatility relationship between international energy and agricultural commodity spot markets and show significant linkages between energy and cereal markets....
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...…biofuel and agricultural commodities in the United States (Du & McPhail, 2012; Gardebroek & Hernandez, 2013; Trujillo-Barrera et al., 2012; Zhang et al., 2009), China (Wu & Li, 2013), Brazil (Serra, 2011; Serra et al., 2011), Germany (Cabrera & Schulz, 2016) and world (Mensi et al., 2014) markets....
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..., 2011), Germany (Cabrera & Schulz, 2016) and world (Mensi et al., 2014) markets....
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TL;DR: In this paper, the co-movements between world oil prices and global prices for corn, soybean and wheat using copulas were investigated, showing that food price spikes are not caused by positive extreme oil price changes.
207 citations
"Crude Oil Volatility Transmission A..." refers background in this paper
...…et al., 2008; Baffes, 2007; Ciaian & Kancs, 2011; Gilbert, 2010; Harri et al., 2009; Hassouneh et al., 2012; Kristoufek et al., 2012; Pala, 2013; Reboredo, 2012; Tadesse et al., 2014; Wang et al., Thenmozhi and Maurya 135 2014), few researchers have confirmed volatility transmission between…...
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