Dynamic spillovers among major energy and cereal commodity prices

Walid Mensi, Shawkat Hammoudeh, Duc Khuong Nguyen and Seong-Min Yoon

Energy Economics, 2014, vol. 43, issue C, 225-243

Abstract: Over the past decade, the sharp increases in the prices of oil and agricultural commodities have raised serious concerns about the heightened volatility of these markets and the possible negative interactions between them. This article deals with the dynamic return and volatility spillovers across international energy and cereal commodity markets. It also examines the impacts of three types of OPEC news announcements on the volatility spillovers and persistence in these markets. For this purpose, we make use of the VAR-BEKK-GARCH and VAR-DCC-GARCH models for the daily spot prices of eight major commodities including WTI oil, Europe Brent oil, gasoline, heating oil, barley, corn, sorghum, and wheat. Our results provide evidence of significant linkages between these energy and cereal markets. Moreover, the OPEC news announcements are found to exert influence on the oil markets as well as on the oil–cereal relationships. Finally, we show that the persistence of volatility decreases (increases) for the crude oil and heating oil (gasoline) returns after accounting for the OPEC announcements in these multivariate GARCH models. However, the results are more mixed for the cereal markets. Overall, our results can be used to improve the risk-adjusted performance by having more diversified portfolios and also serve to hedge the oil risk more effectively.

Keywords: Cereal; Energy; OPEC meetings; Volatility spillovers; Multivariate GARCH (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (158)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:43:y:2014:i:c:p:225-243

DOI: 10.1016/j.eneco.2014.03.004

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