How far is too far for volatility transmission?

This study investigates the existence of volatility transmission between soybean and its products, which are linked through a cross-border supply chain across the U.S. and China. We estimate a multivariate GARCH model with BEKK specification with daily synchronized returns of the CBOT soybean, DCE soybean meal, and DCE soybean oil futures contracts. To better illustrate the cross-volatility spillovers, we consider volatility transmission across three markets in two subperiods and evaluate the impacts of two significant economic events on price volatility. The estimated results indicate the existence of volatility spillovers to each market from the other two markets. We observe the volatility responses in Chinese soybean product markets to an innovation originating from the U.S. soybean have become weaker after 2009. Moreover, we study the volatility reactions to two significant economic events, the 2008 financial crisis and 2018 U.S.-China trade dispute, but the volatility reactions can only be found in the financial crisis.