Speculation and Volatility Spillover in the Crude Oil and Agricultural Commodity Markets: A Bayesian Analysis

Xiaodong Du (), Cindy Yu and Dermot Hayes

Food and Agricultural Policy Research Institute (FAPRI) Publications (archive only) from Center for Agricultural and Rural Development (CARD) at Iowa State University

Abstract: This paper assesses the roles of various factors influencing the volatility of crude oil prices and the possible linkage between this volatility and agricultural commodity markets. Stochastic volatility models are applied to weekly crude oil, corn, and wheat futures prices from November 1998 to January 2009. Model parameters are estimated using Bayesian Markov chain Monte Carlo methods. The main results are as follows. Speculation, scalping, and petroleum inventories are found to be important in explaining oil price variation. Several properties of crude oil price dynamics are established, including mean-reversion, a negative correlation between price and volatility, volatility clustering, and infrequent compound jumps. We find evidence of volatility spillover among crude oil, corn, and wheat markets after the fall of 2006. This could be largely explained by tightened interdependence between these markets induced by ethanol production.

Keywords: Gibbs sampling; Merton jump; leverage effect; stochastic volatility. (search for similar items in EconPapers)
JEL-codes: G13 Q4 (search for similar items in EconPapers)
Date: 2009-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
https://www.card.iastate.edu/products/publications/pdf/09wp491.pdf Full Text (application/pdf)
https://www.card.iastate.edu/products/publications/synopsis/?p=1104 Online Synopsis (text/html)

Related works:
Journal Article: Speculation and volatility spillover in the crude oil and agricultural commodity markets: A Bayesian analysis (2011)
Working Paper: Speculation and volatility spillover in the crude oil and agricultural commodity markets: A Bayesian analysis (2011)
Working Paper: Speculation and Volatility Spillover in the Crude Oil and Agricultural Commodity Markets: A Bayesian Analysis (2009)
Working Paper: Speculation and Volatility Spillover in the Crude Oil and Agricultural Commodity Markets: A Bayesian Analysis (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ias:fpaper:09-wp491

Access Statistics for this paper

More papers in Food and Agricultural Policy Research Institute (FAPRI) Publications (archive only) from Center for Agricultural and Rural Development (CARD) at Iowa State University Contact information at EDIRC.
Bibliographic data for series maintained by ().