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Volatility Spillover from Oil to Food and Agricultural Raw Material Markets
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Abstract
The upward movement in oil and food prices in the 2000s has attracted interest in the information transmission mechanism between the two markets. This paper investigates the volatility spillover between oil, food consumption item, and agricultural raw material price indexes for the period January 1980 to April 2008. The results of the Cheung-Ng procedure show that variation in oil prices does not Granger cause the variance in food and agricultural raw material prices. Since there is no volatility spillover from oil markets to food and agricultural raw material markets, investors can benefit from risk diversification. However, there is bi-directional spillover between agricultural raw material and food markets.
KeywordsOil PricesFood PricesAgricultural Raw Material PricesVolatility Spillover
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