Time-frequency dynamics of return spillover from crude oil to agricultural commodities

ABSTRACT

We explore return spillover from crude oil to ethanol, corn, soybean and wheat on daily data during 17 May 2005–27 June 2018. This study is unique in capturing the time-frequency dynamics of return spillover. We use the frequency-dependent spillover measure that jointly captures information from time and frequency domain. We also identify two endogenous break dates that segregate the study period in three sub-periods. Our results indicate that return spillover from crude oil to ethanol, major feed stocks (i.e. corn and soybean) and food crop (i.e. wheat) is pronounced only in lower frequency band or long-term (more than 1 month). We find that return spillover is stronger only during 2005–2010, i.e. the period of energy and food crisis.

KEYWORDS:

• Time-frequency dynamics
• crude oil
• agricultural commodities
• return spillover

JEL CLASSIFICATION:

• C32
• Q11
• Q41

Acknowledgments

We remain thankful to the Editor and the anonymous referee for their thorough and collegiate review that improves the paper substantially. We thankfully acknowledge the valuable insights and remarks of Jozef Baruník. We have also benefited from the comments and suggestions of the participants of the Western Economic Association International’s 15^th International Conference (jointly with Keio University) in Tokyo. However, any remaining error is solely ours.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ A specific grade of corn as per U.S. Department of Agriculture standards.