Title: Modelling the mean and volatility dynamic relationship between the environmental risk or exchange rate volatility surprise and Commodity Research Bureau future price index
Authors: Ching-Chun Wei
Addresses: Department of Finance, Providence University, 200, Sec. 7, Taiwan Boulevard, 43301 Taichung City, Taiwan
Abstract: This paper focuses on volatility interactions between energy, agricultural, and environmental risk (proxy variable, DJSI) and exchange rate volatility surprise. Using five MGARCH models, our empirical results present significant own short-term and long-term persistence effects and also cross-market spillover short-term and long-term persistence effects among energy, agricultural, and environmental risk for the pre- and post-2008 financial crisis. This paper also finds that the mean and volatility spillover effects are more significant post the financial crisis than for the pre-crisis period, implying that the impact of the financial crisis is bigger post the crisis. The results provide strong evidence of spillover effects coming from the volatility surprise across markets.
Keywords: environmental risk; volatility surprise; financial crisis; MGARCH models.
International Journal of Sustainable Economy, 2017 Vol.9 No.4, pp.281 - 299
Received: 18 Apr 2016
Accepted: 09 Sep 2016
Published online: 23 Aug 2017 *