Commodity markets volatility transmission: Roles of risk perceptions and uncertainty in financial markets

Gozgor, Giray, Lau, Chi Keung and Bilgin, Mehmet Huseyin (2016) Commodity markets volatility transmission: Roles of risk perceptions and uncertainty in financial markets. Journal of International Financial Markets, Institutions and Money, 44. pp. 35-45. ISSN 1042 4431

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Official URL: http://dx.doi.org/10.1016/j.intfin.2016.04.008

Abstract

This paper uses GJR–GARCH estimations to analyze the price volatility transmissions among the crude oil, corn, soybeans, sugar, and wheat markets. Special role is also given to two driving mechanisms of the relationship: (i) the volatility index (VIX) as a measure of risk perceptions, and (ii) the equity market uncertainty (EMU) index as a measure of uncertainty in financial markets. The analysis covers the daily futures markets data from January 1, 1990 to July 31, 2015, and several sub-periods in the empirical strategy are also considered. The empirical results show that (i) crude oil return is positively related to four agricultural commodity returns; (ii) a higher risk perception in financial markets suppresses both the corn and soybeans returns over the period August 1, 2008–July 31, 2015; (iii) a higher uncertainty in financial markets is negatively related to the corn and soybeans returns for the period from June 1, 2010 to July 31, 2015; (iv) the results for the effects of risk perceptions and uncertainty on wheat market returns are not statistically robust; i.e., these results are time-specific in the different sub-period analyses.

Item Type: Article
Uncontrolled Keywords: Uncertainty; Risk perceptions; The VIX; Volatility spillover; Financial markets; Futures markets; Commodity markets; Crude oil markets
Subjects: N300 Finance
Department: Faculties > Business and Law > Newcastle Business School > Business and Management
Depositing User: Becky Skoyles
Date Deposited: 30 Jun 2016 14:51
Last Modified: 13 Sep 2017 19:53
URI: http://nrl.northumbria.ac.uk/id/eprint/27207

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