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News surprises and volatility spillover among agricultural commodities: The case of corn, wheat, soybean and soybean oil

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  • Hamadi, Hassan
  • Bassil, Charbel
  • Nehme, Tamara

Abstract

This paper focuses on commodity financialization and examines the level of interdependence across major agricultural commodities. Specifically, we test the level of interdependence across corn, wheat, soybeans and soybean oil in terms of return volatility spillover. We further investigate the impact of macroeconomic announcements and news on the measurement of integration among these commodities. We apply a combination of econometric tools – the ICSS, GARCH(1,1) and 3SLS models and incorporate structural breaks – to measure the instantaneous and delayed volatility spillovers among these agricultural commodities. We find significant evidence of bidirectional volatility spillovers; particularly, there is more spillover from soybeans and soybean oil markets to corn and wheat markets, than the inverse. In addition, a news surprise originating in the economy has strong impact on the variance of agricultural commodities.

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  • Hamadi, Hassan & Bassil, Charbel & Nehme, Tamara, 2017. "News surprises and volatility spillover among agricultural commodities: The case of corn, wheat, soybean and soybean oil," Research in International Business and Finance, Elsevier, vol. 41(C), pages 148-157.
    • Handle: RePEc:eee:riibaf:v:41:y:2017:i:c:p:148-157
    DOI: 10.1016/j.ribaf.2017.04.006
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    3. Wang, Hao & Dong, Yizhe & Sun, Mingli & Shi, Baofeng & Ji, Hao, 2024. "Dynamic dependence of futures basis between the Chinese and international grains markets," Economic Modelling, Elsevier, vol. 130(C).
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    5. Dejan Živkov & Jasmina Đurašković & Marina Gajić‐Glamočlija, 2022. "Multiscale downside risk interdependence between the major agricultural commodities," Agribusiness, John Wiley & Sons, Ltd., vol. 38(4), pages 990-1011, October.
    6. Yao, Yuan & Zhao, Yang & Li, Yan, 2022. "A volatility model based on adaptive expectations: An improvement on the rational expectations model," International Review of Financial Analysis, Elsevier, vol. 82(C).
    7. John Robertson & University of Dundee, Dundee, UK, 2020. "Volatility Transmission between Oil Prices and Stock Prices as a New Source of Instability: Lessons from the UK Experience," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 7(2), pages 217-223.
    8. Cao, Yan & Cheng, Sheng, 2021. "Impact of COVID-19 outbreak on multi-scale asymmetric spillovers between food and oil prices," Resources Policy, Elsevier, vol. 74(C).
    9. Śmiech, Sławomir & Papież, Monika & Fijorek, Kamil & Dąbrowski, Marek A., 2019. "What drives food price volatility? Evidence based on a generalized VAR approach applied to the food, financial and energy markets," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-32.
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