Crude Oil Volatility Transmission Across Food Commodity Markets: A Multivariate BEKK-GARCH Approach:

doi:10.1177/0972652720927623

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Crude Oil Volatility Transmission Across Food Commodity Markets: A Multivariate BEKK-GARCH Approach:

Journal Article•DOI•

Crude Oil Volatility Transmission Across Food Commodity Markets: A Multivariate BEKK-GARCH Approach:

M. Thenmozhi¹, Shipra Maurya¹•Institutions (1)

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.

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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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Journal Article•DOI•

Volatility integration of gold and crude oil prices with the interest rates in India

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Shailesh Rastogi, Adesh Doifode, Jagjeevan Kanoujiya, Satyendra Pratap Singh

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.

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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.

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8 citations

Journal Article•DOI•

VIX and Major Agricultural Future Markets: Dynamic Linkage and Time-Frequency Relations Around the COVID-19 Outbreak

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Hongjun Zeng, Ran Lu

19 Sep 2022-Social Science Research Network

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.

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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.

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5 citations

Journal Article•DOI•

Dynamic spillover effect and hedging between the gold price and key financial assets. New evidence from Vietnam

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Ngo Thai Hung

05 Jul 2021-Macroeconomics and Finance in Emerging Market Economies

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.

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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...

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4 citations

Journal Article•DOI•

Spillovers and Directional Predictability between International Energy Commodities and their Implications for Optimal Portfolio and Hedging

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Nader Trabelsi, Aviral Kumar Tiwari, Shawkat Hammoudeh

01 Jun 2022-The North American Journal of Economics and Finance

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.

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3 citations

Journal Article•DOI•

Integration and Volatility Spillover Among Environmental, Social and Governance Indices: Evidence from BRICS Countries

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Satyaban Sahoo, Sanjay Kumar

01 Aug 2022-Global Business Review

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).

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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.

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3 citations

References

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Journal Article•DOI•

Volatility Spillovers between Food and Energy Markets, A Semiparametric Approach

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Teresa Serra

02 Sep 2011-Energy Economics

TL;DR: In this paper, the authors examined volatility links between food and energy prices by using a semiparametric GARCH model, which is essentially a nonparametric correction of the parametric conditional covariance function.

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203 citations

"Crude Oil Volatility Transmission A..." refers background in this paper

...…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....
[...]
...For instance, the United States uses corn for producing ethanol and soybean for biodiesel; Brazil uses sugar for producing ethanol; China uses wheat, corn, sweet sorghum and cassava for producing ethanol....
[...]
..., 2009), China (Wu & Li, 2013), Brazil (Serra, 2011; Serra et al., 2011), Germany (Cabrera & Schulz, 2016) and world (Mensi et al....
[...]
...The proponents of finance have studied the price risk and correlation structure between the trio, i.e., crude oil, 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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...Serra et al. (2011) and Serra (2011) support the unidirectional price and volatility spillover from crude oil and sugar market to ethanol market in Brazil....
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Journal Article•DOI•

Oil price shocks and agricultural commodity prices

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Yudong Wang¹, Chongfeng Wu¹, Li Yang²•Institutions (2)

Shanghai Jiao Tong University¹, University of New South Wales²

01 Jul 2014-Energy Economics

TL;DR: In this article, a structural VAR analysis of agricultural commodity prices to oil price changes was conducted, and it was shown that the responses of agricultural prices to price changes depend greatly on whether they are caused by oil supply shocks, aggregate demand shocks or other oil-specific shocks mainly driven by precautionary demand.

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199 citations

Journal Article•DOI•

Interdependencies in the energy–bioenergy–food price systems: A cointegration analysis

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Pavel Ciaian¹, d'Artis Kancs¹•Institutions (1)

Catholic University of Leuven¹

01 Jan 2011-Resource and Energy Economics

TL;DR: In this paper, the authors developed a vertically integrated multi-input, multi-output market model with two channels of price transmission: a direct biofuel channel and an indirect input channel.

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184 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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Journal Article•DOI•

Ethanol, Corn, and Soybean Price Relations in a Volatile Vehicle-Fuels Market

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Zibin Zhang¹, Luanne Lohr¹, Cesar L. Escalante¹, Michael E. Wetzstein¹•Institutions (1)

University of Georgia¹

02 Jun 2009-Energies

TL;DR: In this article, the authors investigated the relationship between agricultural commodity prices and ethanol prices using cointegration, vector error corrections (VECM), and multivariate generalized autoregressive conditional heteroskedascity (MGARCH) models.

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Abstract: The rapid upward shift in ethanol demand has raised concerns about ethanol’s impact on the price level and volatility of agricultural commodities. The popular press attributes much of this volatility in commodity prices to a price bubble in ethanol fuel and recent deflation. Market economics predicts not only a softening of demand to high commodity prices but also a positive supply response. This volatility in ethanol and commodity prices are investigated using cointegration, vector error corrections (VECM), and multivariate generalized autoregressive conditional heteroskedascity (MGARCH) models. In terms of derived demand theory, results support ethanol and oil demands as derived demands from vehicle-fuel production. Gasoline prices directly influence the prices of ethanol and oil. However, of greater significance for the fuel versus food security issue, results support the effect of agricultural commodity prices as market signals which restore commodity markets to their equilibriums after a demand or supply event (shock). Such shocks may in the short-run increase agricultural commodity prices, but decentralized freely operating markets will mitigate the persistence of these shocks. Results indicate in recent years there are no long-run relations among fuel (ethanol, oil and gasoline) prices and agricultural commodity (corn and soybean) prices.

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174 citations

"Crude Oil Volatility Transmission A..." refers background or methods in this paper

...Specifically, Indian crude oil spot prices surged by 28 percent from September, 2011 to September, 2012.1 During the same time, spot prices of Indian wheat, soybean and maize rose by 32 percent, 81 percent and 26 percent,2 respectively, may be due to the food policy and EXIM policy changes in India and global factors such as E.U. debt crisis, drought in the United States, turbulence in global oil markets, etc....
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...For instance, the United States uses corn for producing ethanol and soybean for biodiesel; Brazil uses sugar for producing ethanol; China uses wheat, corn, sweet sorghum and cassava for producing ethanol....
[...]
...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)....
[...]
...…oil, 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)…...
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...Zhang et al. (2009) do not find any spillover from ethanol to corn and soybean, and Kaltalioglu and Soytas (2011) conclude that there is no volatility spillover from oil market to food and raw material markets....
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Posted Content•

The Integration of Energy and Agricultural Markets

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Wallace E. Tyner

01 Jan 2009-Research Papers in Economics

TL;DR: In this paper, the evolving links between energy and agricultural commodity prices were discussed, and the drivers in these markets as well as other major issues facing the corn ethanol industry in the United States such as the blend wall.

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Abstract: This article addresses the evolving links between energy and agricultural markets. Prior to 2005, there was little correlation between energy and agricultural commodity prices. In 2006–2008, with the ethanol boom in the United States, there emerged a strong link between crude oil, gasoline, and corn prices. There was little link between ethanol and corn. However, in late 2008 and 2009, the markets changed as ethanol production came under severe economic pressure and 2 billion out of 12 billion gallons of capacity shut down. During this period ethanol became priced more on corn, as the breakeven corn price helped drive the ethanol market. This article explores the drivers in these markets as well as other major issues facing the corn ethanol industry in the United States such as the blend wall. The article concludes with a review of prospects of a future cellulosic biofuels industry.

...read moreread less

161 citations