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El Niño and La Niña induced volatility spillover effects in the U.S. soybean and water equity markets

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  • Jingze Jiang
  • T. Randall Fortenbery

Abstract

This paper examined links between U.S. soybean prices and the Dow Jones U.S. Water Index (DJUSWU). We particularly studied the impact of El Niño and La Niña events on price risk spillovers. Results showed that La Niña significantly increases the linkages between soybean and water equity markets. Based on this, we identified a new soybean hedge strategy that would be possible if a futures contract for the DJUSWU existed. This new strategy improves on the effectiveness of both a conventional naïve soybean market hedge, and a traditional time-varying hedge. The findings can be used to assist soybean agents in managing increased market risks associated with extreme weather events.

Suggested Citation

  • Jingze Jiang & T. Randall Fortenbery, 2019. "El Niño and La Niña induced volatility spillover effects in the U.S. soybean and water equity markets," Applied Economics, Taylor & Francis Journals, vol. 51(11), pages 1133-1150, March.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:11:p:1133-1150
    DOI: 10.1080/00036846.2018.1524980
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    Cited by:

    1. Wei, Yu & Zhang, Jiahao & Chen, Yongfei & Wang, Yizhi, 2022. "The impacts of El Niño-southern oscillation on renewable energy stock markets: Evidence from quantile perspective," Energy, Elsevier, vol. 260(C).
    2. Yanxin Liu & Huajiao Li & Jianhe Guan & Xueyong Liu & Yajie Qi, 2019. "The role of the world’s major steel markets in price spillover networks: an analysis based on complex network motifs," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(4), pages 697-720, December.

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