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Volatility Effects of Index Trading and Spillovers on US Agricultural Futures Markets: A Multivariate GARCH Approach

Lookup NU author(s): Dr Ana Sanjuan, Dr Philip Dawson

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Abstract

© 2017 The Agricultural Economics Society. We examine the effects of speculation in the form of index trading on contemporaneous returns and volatility on corn, soybeans and wheat futures markets on the Chicago Board of Trade using multivariate generalised autoregressive conditional heteroscedasticity models and weekly data for 2006-2014. We also assess spillovers. Results are threefold. First, contemporaneous effects of index trading on own returns are positive and inelastic, and they are partially mitigated in the following week. Second, volatility depends positively on own past volatility, and volatility spillovers are limited. Third, index trading reduces own volatility.

Publication metadata

Author(s): Sanjuan-Lopez AI, Dawson PJ

Publication type: Article

Publication status: Published

Journal: Journal of Agricultural Economics

Year: 2017

Volume: 68

Issue: 3

Pages: 822-838

Print publication date: 01/09/2017

Online publication date: 12/05/2017

Acceptance date: 01/02/2017

ISSN (print): 0021-857X

ISSN (electronic): 1477-9552

Publisher: Wiley-Blackwell

URL: https://doi.org/10.1111/1477-9552.12216

DOI: 10.1111/1477-9552.12216

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