Paper: arXiv 2412.15738

Authors: Ying-Hui Shao, Yan-Hong Yang, Wei-Xing Zhou

Abstract

This study examines contemporaneous and lagged spillover effects in BRICS staple grain futures markets and their linkages with U.S. markets. The results show that contemporaneous spillovers dominate, while net spillovers are driven by lagged connectedness. Systemic risk is lower in intra-BRICS markets compared to those including the U.S., highlighting the U.S. grain market’s significant influence. Brazilian and U.S. grains are key net spillover contributors, excluding U.S. rice, while South African staple grains act as major net receivers. Particularly, the spillover between soybeans is the strongest. The study also reveals heterogeneous impacts of the Russia-Ukraine conflict and Black Sea Grain Initiative on grain futures.

Complexity vs Empirical Score

  • Math Complexity: 4.5/10
  • Empirical Rigor: 7.0/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper provides a solid empirical assessment of risk spillovers across agricultural futures markets using a novel R2 decomposition framework. While mathematically straightforward (relying on linear regression-based R2 metrics rather than complex stochastic calculus), its empirical analysis is rigorous and relevant to current geopolitical shocks like the Russia-Ukraine conflict.

Research Flowchart

  flowchart TD
    A[Research Goal: Analyze Risk Spillovers Between BRICS & US Grain Futures] --> B[Data Inputs: Daily Grain Futures Prices for BRICS & US]
    B --> C[Methodology: Time-Series Analysis & Connectedness Index]
    C --> D[Compute Contemporaneous & Lagged Risk Spillovers]
    D --> E[Analyze External Shocks: Russia-Ukraine Conflict & Black Sea Grain Initiative]
    E --> F[Key Outcome 1: US & Brazil are Main Net Risk Transmitters; Soybeans Strongest Spillover]
    E --> G[Key Outcome 2: Contemporaneous Spillovers Dominate; Systemic Risk Lower Intra-BRICS vs US Included]