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arXiv · 2409.19307

Russia-Ukraine conflict and the quantile return connectedness of grain futures in the BRICS and international markets

Yan-Hong Yang·Ying-Hui Shao·Wei-Xing Zhou
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Abstract

This study investigates quantile-based connectedness among BRICS and international grain futures around the Russia-Ukraine conflict and milestones of the Black Sea Grain Initiative. Using a dynamic quantile VAR combined with a frequency-domain decomposition, we trace spillovers across market states and horizons. Spillovers are heterogeneous across quantiles, as the time-varying total connectedness index hovers near 95% in the tails, remains well above the median, and is higher before the outbreak than after. Furthermore, grain type and regional proximity strengthen pairwise connectedness. South African grain futures are persistent net receivers, whereas Argentine grain futures, U.S. soybean, and Ukrainian wheat are key transmitters. In the frequency domain, short-term components dominate total spillovers. In portfolio applications, the minimum connectedness portfolio delivers a positive Sharpe ratio under both normal and lower tail conditions. Overall, the results inform asset allocation and risk management in grain futures markets under geopolitical instability and support policy formulation.

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Yan-Hong Yang, Ying-Hui Shao, Wei-Xing Zhou. 2024-09-28. Russia-Ukraine conflict and the quantile return connectedness of grain futures in the BRICS and international markets. https://arxiv.org/abs/2409.19307

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