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Geopolitical Risk and the Volatility of the International Grain Futures Market

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  • Yun‐Shi Dai
  • Peng‐Fei Dai
  • Wei‐Xing Zhou

Abstract

The current international landscape is turbulent and unstable, with geopolitical risk having emerged as a significant threat. Focusing on the grain futures market, this paper builds different geopolitical risk measures by random matrix theory and constructs GJR‐GARCH‐MIDAS models to investigate the impact of geopolitical risk on grain market volatility. The findings indicate that rolling‐window modeling performs better in describing the overall volatility of wheat, corn, soybean, and rice markets, and two‐factor models generally exhibit stronger explanatory power in most cases. Short‐term volatility demonstrates obvious volatility clustering and high volatility persistence, without significant asymmetry. Additionally, realized volatility of wheat, corn, and soybean significantly exacerbates their long‐run volatility, while geopolitical risks of different dimensions show varying directions and degrees of effects in explaining long‐term volatility of the four submarkets. This study offers valuable insights into grain market volatility and geopolitical risk, contributing to agricultural futures investment and global food security.

Suggested Citation

  • Yun‐Shi Dai & Peng‐Fei Dai & Wei‐Xing Zhou, 2025. "Geopolitical Risk and the Volatility of the International Grain Futures Market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 45(10), pages 1757-1794, October.
    • Handle: RePEc:wly:jfutmk:v:45:y:2025:i:10:p:1757-1794
    DOI: 10.1002/fut.70013
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