Dynamic spillovers among major energy and cereal commodity prices

• Published in: Energy economics Vol. 43; pp. 225 - 243
• Main Authors: Mensi, Walid, Hammoudeh, Shawkat, Nguyen, Duc Khuong, Yoon, Seong-Min
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.05.2014; Elsevier; Elsevier Science Ltd
• Subjects: Accounting; Agricultural commodities; Agricultural economics; Agronomy. Soil science and plant productions; Applied sciences; Biological and medical sciences; Cereal; Cereals; Commodity prices; Economic data; Energy; Energy economics; Energy market; Europe; Exact sciences and technology; Fossil fuels and derived products; Fundamental and applied biological sciences. Psychology; General, economic and professional studies; Generalities. Biometrics, experimentation. Remote sensing; Hedging; Hordeum vulgare; Markets; Methodology. Modelling; Multivariate GARCH; News; Oil; OPEC; OPEC meetings; Organization of petroleum exporting countries; Petroleum industry; Portfolio diversification; Price increases; Prices; Rates of return; Risk; Sorghum; Spillovers; Stochastic models; Studies; Triticum aestivum; Volatility; Volatility spillovers; Wheat; Europe; Energy; Cereal; OPEC meetings; G15; G14; Multivariate GARCH; Volatility spillovers; Monocotyledones; Volatility; Autoregressive model; Information communication; Gramineae; Angiospermae; OPEC; Barley; Time series; Corn; Econometric model; Petroleum product; Sorghum; Fuel oil; Petroleum; Spillover; Gasoline; Spermatophyta; Spot price; Wheat
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2014.03.004

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. •We study the return and volatility spillovers across international energy and cereal commodity markets.•The impacts of OPEC news announcements on these spillovers are also considered.•Our results show evidence of significant linkages between the energy and cereal markets.•OPEC announcements exert influence on the energy markets as well as on the energy–cereal links.•The presence of OPEC news in multivariate volatility models leads to changes in volatility persistence.