Dynamics of volatility spillover in commodity markets: Linking crude oil to agriculture

This paper examines spillover effects among markets of crude oil and ten major agricultural commodities by employing the Diebold and Yılmaz (2009, 2012) spillover frameworks to returns and EGARCH filtered volatilities. We account for structural variations in data by dividing the data into two subsamples: from July 1986 to December 2005 (pre-2006 subsample) and from January 2006 to June 2016 (post-2006 subsample). Our findings indicate that there is minuscule information transmission among crude oil and agricultural commodities over the pre-2006 subsample, however, crude oil becomes the net receiver of information over the post-2006 subsample. Second, our findings indicate asymmetric and bidirectional flow of information among crude oil and agricultural commodities that intensifies during periods of financial and economic turmoil. Last, net volatility spillover increases in periods of large declines in the crude oil price, such as in 2008 and later in 2014. Overall, we document a more detailed insight into channels of connectedness among the underlying commodities, which may assist developing policy recommendation, portfolio designs, and risk management decisions.