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Volatility transmission in agricultural futures markets

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  • Beckmann, Joscha
  • Czudaj, Robert

Abstract

After the huge rise and fall of agricultural commodity spot and futures prices between 2007 and 2008, the potential reasons for and the impact of the strong rise in volatility provoked an intensive debate in the media as well as in the academic literature. However, owing to the increasing interdependence of global markets, an isolated examination of single futures markets does not seem to be appropriate. Therefore, the aim of this study is to investigate the volatility spillover between various agricultural futures markets from a new perspective. To do this, we use data for the prices of first nearby futures contracts for corn, cotton, and wheat and estimate GARCH-in-mean VAR models in the tradition of Elder (2003). Our results provide evidence in favor of an existing short-run volatility transmission process in agricultural futures markets.

Suggested Citation

  • Beckmann, Joscha & Czudaj, Robert, 2014. "Volatility transmission in agricultural futures markets," Economic Modelling, Elsevier, vol. 36(C), pages 541-546.
    • Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:541-546
    DOI: 10.1016/j.econmod.2013.09.036
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    More about this item

    Keywords

    Agriculture; Commodities; Futures markets; GARCH-in-mean VAR; Volatility;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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