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

Roy Endré Dahl, Atle Oglend and Muhammad Yahya

Journal of Commodity Markets, 2020, vol. 20, issue C

Abstract: 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.

Keywords: Dynamic spillover; Crude oil; Agricultural commodities; Spillover index; Price volatility (search for similar items in EconPapers)
JEL-codes: C01 C22 O13 Q02 Q13 Q41 Q47 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (77)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:20:y:2020:i:c:s2405851319300765

DOI: 10.1016/j.jcomm.2019.100111

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