Stock markets’ bubbles burst and volatility spillovers in agricultural commodity markets

• Financialization has generated a link between agricultural and financial markets.
• We investigate to what extent bubble bursts impact commodity price volatility.
• The focus is on the 2000 dot.com bubble and the 2008 financial crisis.
• We analyze VIRF from for S&P500 to S&P Agriculture, Grain and Corn Indexes.
• Empirical findings underline a rising financialization in the analyzed markets.

Our paper focuses on commodity financialization and the gradual integration between commodity and financial markets, investigating to what extent shocks in stock markets impact commodity price volatility, and the persistency of the phenomenon. To this end, we estimate Volatility Impulse Response Function from stock markets to agricultural commodity markets over a symmetric window before and after two of the most important bubble bursts since the new millennium, the 2000 dot.com bubble and the 2008 financial crises. Results highlight that volatility spillover increased significantly after the 2008 financial crises, signalling a rising interconnection between financial and agricultural commodity markets.

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