Volatility spillovers for spot, futures, and ETF prices in energy and agriculture

The agricultural and energy industries are closely related, both biologically and financially. The paper discusses the relationship and the interactions on price and volatility, with special focus on the covolatility spillover effects for these two industries. The interaction and covolatility spillovers or the delayed effect of a returns shock in one asset on the subsequent volatility or covolatility in another asset, between the energy and agricultural industries is the primary emphasis of the paper. Although there has already been significant research on biofuel and biofuel-related crops, much of the previous research has sought to find a relationship among commodity prices. Only a few published papers have been concerned with volatility spillovers. However, it must be emphasized that there have been numerous technical errors in the theoretical and empirical research, which needs to be corrected. The paper not only considers futures prices as a widely-used hedging instrument, but also takes an interesting new hedging instrument, ETF, into account. ETF is regarded as index futures when investors manage their portfolios, so it is possible to calculate an optimal dynamic hedging ratio. This is a very useful and interesting application for the estimation and testing of volatility spillovers. In the empirical analysis, multivariate conditional volatility diagonal BEKK models are estimated for comparing patterns of covolatility spillovers. The paper provides a new way of analyzing and describing the patterns of covolatility spillovers, which should be useful for the future empirical analysis of estimating and testing covolatility spillover effects.

The effect of the geomagnetic field on cosmic ray energy estimates and large scale anisotropy searches on data from the Pierre Auger Observatory

We present a comprehensive study of the influence of the geomagnetic field on the energy estimation of extensive air showers with a zenith angle smaller than 60 degrees, detected at the Pierre Auger Observatory. the geomagnetic field induces an azimuthal modulation of the estimated energy of cosmic rays up to the similar to 2% level at large zenith angles. We present a method to account for this modulation of the reconstructed energy. We analyse the effect of the modulation on large scale anisotropy searches in the arrival direction distributions of cosmic rays. At a given energy, the geomagnetic effect is shown to induce a pseudo-dipolar pattern at the percent level in the declination distribution that needs to be accounted for.