VIX and Major Agricultural Future Markets: Dynamic Linkage and Time-Frequency Relations Around the COVID-19 Outbreak

The purpose of this paper is to examine the volatility spillover and lead-lag relationship between the CBOE Volatility Index (VIX) and the major agricultural future markets before and during the COVID-19 outbreak. The VAR-BEKK-GARCH method and wald test were used, as was the wavelet transform. Our findings indicate that (1) prior to the COVID-19 outbreak, there was a two-way volatility spillover impact between the majority of the sample markets. In comparison, volatility transmission between the VIX index and the agricultural future market was significantly lower following the COVID-19 outbreak; (2) we observed greater coherence at higher frequencies than at lower frequencies, implying that the interdependence between the two VIX indices and the agricultural future market was stronger over a longer time-frequency domain; and (3) the VIX's signaling effect on various agricultural future prices after the COVID-19 outbreak was significantly lower. We conduct the first comprehensive investigation of the VIX's correlation with major agricultural futures, most especially COVID-19. Our findings contribute to a better understanding of the risk transmission mechanism between the VIX and major agricultural commodities futures contracts. And our findings have significant implications for investors and portfolio managers, as well as for policymakers who are concerned about the price of agricultural futures.