El Niño and La Niña induced volatility spillover effects in the U.S. soybean and water equity markets

Jingze Jiang () and T. Randall Fortenbery

Applied Economics, 2019, vol. 51, issue 11, 1133-1150

Abstract: This paper examined links between U.S. soybean prices and the Dow Jones U.S. Water Index (DJUSWU). We particularly studied the impact of El Niño and La Niña events on price risk spillovers. Results showed that La Niña significantly increases the linkages between soybean and water equity markets. Based on this, we identified a new soybean hedge strategy that would be possible if a futures contract for the DJUSWU existed. This new strategy improves on the effectiveness of both a conventional naïve soybean market hedge, and a traditional time-varying hedge. The findings can be used to assist soybean agents in managing increased market risks associated with extreme weather events.

Date: 2019
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DOI: 10.1080/00036846.2018.1524980

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