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How Scary Are Food Scares? Evidence from Animal Disease Outbreaks
Author(s) -
Houser Matthew,
Karali Berna
Publication year - 2020
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1002/aepp.13001
Subject(s) - volatility (finance) , outbreak , futures contract , spillover effect , livestock , economics , agribusiness , feeder cattle , food safety , agriculture , financial economics , monetary economics , business , agricultural science , biology , food science , microeconomics , ecology , virology
The economic impacts of food safety events are an ongoing concern for the food industry and policymakers. Animal disease outbreaks can be characterized by prolonged abnormal returns and greater price variability in livestock markets. We investigate the return and volatility patterns in live cattle and lean hog futures following BSE and H1N1 outbreaks by modeling time‐varying volatility and spillover effects between these substitutes. We find that cattle and hog futures markets were affected during these outbreaks with decreasing returns and increasing volatility. Volatility of hogs is found to reduce cattle volatility, providing evidence for price stabilization across linked markets.