[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v43y2014icp225-243.html
   My bibliography  Save this article

Dynamic spillovers among major energy and cereal commodity prices

Author

Listed:
  • Mensi, Walid
  • Hammoudeh, Shawkat
  • Nguyen, Duc Khuong
  • Yoon, Seong-Min
Abstract
Over the past decade, the sharp increases in the prices of oil and agricultural commodities have raised serious concerns about the heightened volatility of these markets and the possible negative interactions between them. This article deals with the dynamic return and volatility spillovers across international energy and cereal commodity markets. It also examines the impacts of three types of OPEC news announcements on the volatility spillovers and persistence in these markets. For this purpose, we make use of the VAR-BEKK-GARCH and VAR-DCC-GARCH models for the daily spot prices of eight major commodities including WTI oil, Europe Brent oil, gasoline, heating oil, barley, corn, sorghum, and wheat. Our results provide evidence of significant linkages between these energy and cereal markets. Moreover, the OPEC news announcements are found to exert influence on the oil markets as well as on the oil–cereal relationships. Finally, we show that the persistence of volatility decreases (increases) for the crude oil and heating oil (gasoline) returns after accounting for the OPEC announcements in these multivariate GARCH models. However, the results are more mixed for the cereal markets. Overall, our results can be used to improve the risk-adjusted performance by having more diversified portfolios and also serve to hedge the oil risk more effectively.

Suggested Citation

  • Mensi, Walid & Hammoudeh, Shawkat & Nguyen, Duc Khuong & Yoon, Seong-Min, 2014. "Dynamic spillovers among major energy and cereal commodity prices," Energy Economics, Elsevier, vol. 43(C), pages 225-243.
    • Handle: RePEc:eee:eneeco:v:43:y:2014:i:c:p:225-243
    DOI: 10.1016/j.eneco.2014.03.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988314000516
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2014.03.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Matteo Manera & Marcella Nicolini & Ilaria Vignati, 2012. "Returns in commodities futures markets and financial speculation: a multivariate GARCH approach," Quaderni di Dipartimento 170, University of Pavia, Department of Economics and Quantitative Methods.
    2. Ling, Shiqing & McAleer, Michael, 2003. "Asymptotic Theory For A Vector Arma-Garch Model," Econometric Theory, Cambridge University Press, vol. 19(2), pages 280-310, April.
    3. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(1), pages 122-150, February.
    4. Christopher L. Gilbert, 2010. "How to Understand High Food Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 398-425, June.
    5. Chang, Chia-Lin & Chen, Li-Hsueh & Hammoudeh, Shawkat & McAleer, Michael, 2012. "Asymmetric adjustments in the ethanol and grains markets," Energy Economics, Elsevier, vol. 34(6), pages 1990-2002.
    6. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    7. repec:dau:papers:123456789/14980 is not listed on IDEAS
    8. Sari, Ramazan & Hammoudeh, Shawkat & Chang, Chia-Lin & McAleer, Michael, 2012. "Causality between market liquidity and depth for energy and grains," Energy Economics, Elsevier, vol. 34(5), pages 1683-1692.
    9. Mensi, Walid & Beljid, Makram & Boubaker, Adel & Managi, Shunsuke, 2013. "Correlations and volatility spillovers across commodity and stock markets: Linking energies, food, and gold," Economic Modelling, Elsevier, vol. 32(C), pages 15-22.
    10. Massimiliano Caporin & Michael McAleer, 2009. "Do We Really Need Both BEKK and DCC? A Tale of Two Covariance Models," CARF F-Series CARF-F-156, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    11. Vivian, Andrew & Wohar, Mark E., 2012. "Commodity volatility breaks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 395-422.
    12. Abbott, Philip C. & Hurt, Christopher & Tyner, Wallace E., 2008. "What's Driving Food Prices?," Issue Reports 37951, Farm Foundation.
    13. Jeantheau, Thierry, 1998. "Strong Consistency Of Estimators For Multivariate Arch Models," Econometric Theory, Cambridge University Press, vol. 14(1), pages 70-86, February.
    14. Chang, Chia-Lin & McAleer, Michael & Tansuchat, Roengchai, 2011. "Crude oil hedging strategies using dynamic multivariate GARCH," Energy Economics, Elsevier, vol. 33(5), pages 912-923, September.
    15. El Hedi Arouri, Mohamed & Jouini, Jamel & Nguyen, Duc Khuong, 2011. "Volatility spillovers between oil prices and stock sector returns: Implications for portfolio management," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1387-1405.
    16. Gardebroek, Cornelis & Hernandez, Manuel A., 2013. "Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets," Energy Economics, Elsevier, vol. 40(C), pages 119-129.
    17. Creti, Anna & Joëts, Marc & Mignon, Valérie, 2013. "On the links between stock and commodity markets' volatility," Energy Economics, Elsevier, vol. 37(C), pages 16-28.
    18. Hanson, Kenneth & Robinson, Sherman & Schluter, Gerald E., 1993. "Sectoral Effects Of A World Oil Price Shock: Economywide Linkages To The Agricultural Sector," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(1), pages 1-21, July.
    19. Serra, Teresa, 2011. "Volatility spillovers between food and energy markets: A semiparametric approach," Energy Economics, Elsevier, vol. 33(6), pages 1155-1164.
    20. Reboredo, Juan C., 2012. "Do food and oil prices co-move?," Energy Policy, Elsevier, vol. 49(C), pages 456-467.
    21. Cooke, Bryce & Robles, Miguel, 2009. "Recent food prices movements: A time series analysis," IFPRI discussion papers 942, International Food Policy Research Institute (IFPRI).
    22. Daniel A. Sumner, 2009. "Recent Commodity Price Movements in Historical Perspective," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1250-1256.
    23. Chen, Sheng-Tung & Kuo, Hsiao-I & Chen, Chi-Chung, 2010. "Modeling the relationship between the oil price and global food prices," Applied Energy, Elsevier, vol. 87(8), pages 2517-2525, August.
    24. Zhang, Zibin & Lohr, Luanne & Escalante, Cesar & Wetzstein, Michael, 2010. "Food versus fuel: What do prices tell us?," Energy Policy, Elsevier, vol. 38(1), pages 445-451, January.
    25. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    26. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
    27. Hammoudeh, Shawkat M. & Yuan, Yuan & McAleer, Michael, 2009. "Shock and volatility spillovers among equity sectors of the Gulf Arab stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 829-842, August.
    28. Zhang, Qiang & Reed, Michael R., 2008. "Examining the Impact of the World Crude Oil Price on China's Agricultural Commodity Prices: The Case of Corn, Soybean, and Pork," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6797, Southern Agricultural Economics Association.
    29. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    30. repec:bla:eurcho:v:7:y:2008:i:specialissuecap:p:30-35 is not listed on IDEAS
    31. Christopher Gilbert & Wyn Morgan, 2010. "Has food price volatility risen?," Department of Economics Working Papers 1002, Department of Economics, University of Trento, Italia.
    32. Benson, Todd & Minot, Nicholas & Pender, John & Robles, Miguel & von Braun, Joachim, 2013. "Information to guide policy responses to higher global food prices: The data and analyses required," Food Policy, Elsevier, vol. 38(C), pages 47-58.
    33. Luc Bauwens & Sébastien Laurent & Jeroen V. K. Rombouts, 2006. "Multivariate GARCH models: a survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 79-109, January.
    34. Nazlioglu, Saban & Soytas, Ugur, 2011. "World oil prices and agricultural commodity prices: Evidence from an emerging market," Energy Economics, Elsevier, vol. 33(3), pages 488-496, May.
    35. Nazlioglu, Saban & Erdem, Cumhur & Soytas, Ugur, 2013. "Volatility spillover between oil and agricultural commodity markets," Energy Economics, Elsevier, vol. 36(C), pages 658-665.
    36. Abbott, Philip C. & Hurt, Christopher & Tyner, Wallace E., 2009. "What's Driving Food Prices? March 2009 Update," Issue Reports 48495, Farm Foundation.
    37. Bina Cyrus & Vo Minh, 2007. "OPEC in the Epoch of Globalization: An Event Study of Global Oil Prices," Global Economy Journal, De Gruyter, vol. 7(1), pages 1-52, February.
    38. Franz Wirl and Azra Kujundzic, 2004. "The Impact of OPEC Conference Outcomes on World Oil Prices 1984-2001," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 45-62.
    39. Du, Xiaodong & Yu, Cindy L. & Hayes, Dermot J., 2011. "Speculation and volatility spillover in the crude oil and agricultural commodity markets: A Bayesian analysis," Energy Economics, Elsevier, vol. 33(3), pages 497-503, May.
    40. Richards, Timothy J. & Allender, William J. & Hamilton, Stephen F., 2012. "Commodity price inflation, retail pass-through and market power," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 50-57.
    41. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-350, July.
    42. Harri, Ardian & Nalley, Lanier & Hudson, Darren, 2009. "The Relationship between Oil, Exchange Rates, and Commodity Prices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 41(2), pages 501-510, August.
    43. Schmidbauer, Harald & Rösch, Angi, 2012. "OPEC news announcements: Effects on oil price expectation and volatility," Energy Economics, Elsevier, vol. 34(5), pages 1656-1663.
    44. Brian D. Wright, 2011. "The Economics of Grain Price Volatility," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 32-58.
    45. Comte, F. & Lieberman, O., 2003. "Asymptotic theory for multivariate GARCH processes," Journal of Multivariate Analysis, Elsevier, vol. 84(1), pages 61-84, January.
    46. Campiche, Jody L. & Bryant, Henry L. & Richardson, James W. & Outlaw, Joe L., 2007. "Examining the Evolving Correspondence Between Petroleum Prices and Agricultural Commodity Prices," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9881, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    47. Hafner, Christian M. & Herwartz, Helmut, 2006. "A Lagrange multiplier test for causality in variance," Economics Letters, Elsevier, vol. 93(1), pages 137-141, October.
    48. Chang, Ting-Huan & Su, Hsin-Mei, 2010. "The substitutive effect of biofuels on fossil fuels in the lower and higher crude oil price periods," Energy, Elsevier, vol. 35(7), pages 2807-2813.
    49. von Braun, Joachim, 2008. "Rising food prices: What should be done?," Policy briefs 1, International Food Policy Research Institute (IFPRI).
    50. Nazlioglu, Saban, 2011. "World oil and agricultural commodity prices: Evidence from nonlinear causality," Energy Policy, Elsevier, vol. 39(5), pages 2935-2943, May.
    51. Demirer, RIza & Kutan, Ali M., 2010. "The behavior of crude oil spot and futures prices around OPEC and SPR announcements: An event study perspective," Energy Economics, Elsevier, vol. 32(6), pages 1467-1476, November.
    52. Nazlioglu, Saban & Soytas, Ugur, 2012. "Oil price, agricultural commodity prices, and the dollar: A panel cointegration and causality analysis," Energy Economics, Elsevier, vol. 34(4), pages 1098-1104.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Serra, Teresa & Zilberman, David, 2013. "Biofuel-related price transmission literature: A review," Energy Economics, Elsevier, vol. 37(C), pages 141-151.
    2. Maitra, Debasish & Guhathakurta, Kousik & Kang, Sang Hoon, 2021. "The good, the bad and the ugly relation between oil and commodities: An analysis of asymmetric volatility connectedness and portfolio implications," Energy Economics, Elsevier, vol. 94(C).
    3. Nazlioglu, Saban & Erdem, Cumhur & Soytas, Ugur, 2013. "Volatility spillover between oil and agricultural commodity markets," Energy Economics, Elsevier, vol. 36(C), pages 658-665.
    4. Hanif, Waqas & Areola Hernandez, Jose & Shahzad, Syed Jawad Hussain & Yoon, Seong-Min, 2021. "Tail dependence risk and spillovers between oil and food prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 195-209.
    5. Wang, Yudong & Wu, Chongfeng & Yang, Li, 2014. "Oil price shocks and agricultural commodity prices," Energy Economics, Elsevier, vol. 44(C), pages 22-35.
    6. Filip, Ondrej & Janda, Karel & Kristoufek, Ladislav & Zilberman, David, 2019. "Food versus fuel: An updated and expanded evidence," Energy Economics, Elsevier, vol. 82(C), pages 152-166.
    7. Karel Janda & Ladislav Kristoufek, 2019. "The relationship between fuel and food prices: Methods, outcomes, and lessons for commodity price risk management," CAMA Working Papers 2019-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    8. Hasanov, Akram Shavkatovich & Do, Hung Xuan & Shaiban, Mohammed Sharaf, 2016. "Fossil fuel price uncertainty and feedstock edible oil prices: Evidence from MGARCH-M and VIRF analysis," Energy Economics, Elsevier, vol. 57(C), pages 16-27.
    9. Korhan K. Gokmenoglu & Hasan Güngör & Festus Victor Bekun, 2021. "Revisiting the linkage between oil and agricultural commodity prices: Panel evidence from an Agrarian state," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5610-5620, October.
    10. Fowowe, Babajide, 2016. "Do oil prices drive agricultural commodity prices? Evidence from South Africa," Energy, Elsevier, vol. 104(C), pages 149-157.
    11. Yip, Pick Schen & Brooks, Robert & Do, Hung Xuan & Nguyen, Duc Khuong, 2020. "Dynamic volatility spillover effects between oil and agricultural products," International Review of Financial Analysis, Elsevier, vol. 69(C).
    12. Cheng, Sheng & Cao, Yan, 2019. "On the relation between global food and crude oil prices: An empirical investigation in a nonlinear framework," Energy Economics, Elsevier, vol. 81(C), pages 422-432.
    13. Ebenezer, Appiah Collins & Jatoe, John Baptist D. & Mensa-Bonsu, Akwasi, 2018. "Food Price Sensitivity To Changes In Petroleum Price And Exchange Rate In Ghana: A Cointegration Analysis," 2018 Conference (2nd), August 8-11, Kumasi, Ghana 277791, Ghana Association of Agricultural Economists.
    14. Kang, Sang Hoon & Tiwari, Aviral Kumar & Albulescu, Claudiu Tiberiu & Yoon, Seong-Min, 2019. "Exploring the time-frequency connectedness and network among crude oil and agriculture commodities V1," Energy Economics, Elsevier, vol. 84(C).
    15. Ahmed Ghorbel & Wajdi Hamma & Anis Jarboui, 2017. "Dependence between oil and commodities markets using time-varying Archimedean copulas and effectiveness of hedging strategies," Journal of Applied Statistics, Taylor & Francis Journals, vol. 44(9), pages 1509-1542, July.
    16. Fernandez-Perez, Adrian & Frijns, Bart & Tourani-Rad, Alireza, 2016. "Contemporaneous interactions among fuel, biofuel and agricultural commodities," Energy Economics, Elsevier, vol. 58(C), pages 1-10.
    17. Mensi, Walid & Tiwari, Aviral & Bouri, Elie & Roubaud, David & Al-Yahyaee, Khamis H., 2017. "The dependence structure across oil, wheat, and corn: A wavelet-based copula approach using implied volatility indexes," Energy Economics, Elsevier, vol. 66(C), pages 122-139.
    18. Basher, Syed Abul & Sadorsky, Perry, 2016. "Hedging emerging market stock prices with oil, gold, VIX, and bonds: A comparison between DCC, ADCC and GO-GARCH," Energy Economics, Elsevier, vol. 54(C), pages 235-247.
    19. Ayhan KAPUSUZOGLU & Merve KARACAER ULUSOY, 2015. "The interactions between agricultural commodity and oil prices: an empirical analysis," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(9), pages 410-421.
    20. Mokni, Khaled & Ben-Salha, Ousama, 2020. "Asymmetric causality in quantiles analysis of the oil-food ‏ ‏nexus since the 1960s," Resources Policy, Elsevier, vol. 69(C).

    More about this item

    Keywords

    Cereal; Energy; OPEC meetings; Volatility spillovers; Multivariate GARCH;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:43:y:2014:i:c:p:225-243. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.