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How Economic News Drives Implied Volatility in Agricultural Commodity Markets

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  • Yan, Hongqiang
  • Manfredo, Mark
  • Mishra, Ashok

Abstract

We examine whether broad economic news Granger-causes implied volatility derived from options on agricultural futures markets. Using approximately 1.5 million Wall Street Journal articles (1984–2026), we construct 180 daily news topic attention series via Latent Dirichlet Allocation and apply a high-dimensional Granger causality framework that combines sparse-group LASSO variable selection with debiased inference and HAC standard errors. Using implied volatility measures provided by Bloomberg, we find that financial and macroeconomic news topics systematically Granger-cause implied volatility across corn, soybeans, soybean meal, and soybean oil markets and across Bloomberg constant-maturity horizons of 30 days, 60 days, and 3 months. Topics related to program trading and index arbitrage, investment banking, and the 2008 financial crisis are the most robust across commodities, consistent with the financialization of agricultural futures markets. The number of significant news topics declines from 23 at the 30-day maturity to 10 at the 3-month maturity, suggesting that financial news primarily influences short-term uncertainty. A crop-specific news topic is not selected for any commodity-maturity combination. This may be due to crop fundamentals being transmitted to implied volatility through scheduled USDA report releases rather than through ongoing national media coverage.

Suggested Citation

Handle: RePEc:ags:asea26:404810
DOI: 10.22004/ag.econ.404810
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File URL: https://ageconsearch.umn.edu/record/404810/files/Hongqiang_Yan_Yan_Manfredo_Mishra_NCCC_134_2026.pdf
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