Volatility transmissions across international oil market, commodity futures and stock markets: Empirical evidence from China

Abdullahi D. Ahmed and Rui Huo

Energy Economics, 2021, vol. 93, issue C

Abstract: This paper uses a trivariate VAR-BEKK-GARCH model to investigate the dynamic relationship among the Chinese stock market, commodity markets and global oil price. We find significant unidirectional return spillover effect from oil market to stock market, suggesting a strong dependence of the Chinese stock market on the oil market. Our results show significant unidirectional return interaction from the Chinese stock market and global oil market to key commodities indicators in China. In particular, significant return contagions from the Chinese stock market to copper and aluminium futures and from oil market to silver, copper and aluminium markets are observed. Non-existence of return spillovers between gold and stock (oil) suggests the safe-haven role of the gold. In terms of the volatility spillovers, we find bidirectional shocks spillovers between oil and stock markets but unidirectional volatility spillovers from the oil market to the Chinese stock market. For commodities, we show evidence of strong uni-directional shock and volatility spillovers from stock market or oil market to commodities market. However there are no spillover effects from all the commodity markets to either stock market or oil market, implying potential diversification benefits from the Chinese commodity markets. Finally, the paper highlights the results which potentially have important implications for portfolio management and hedge strategies.

Keywords: Return and volatility spillovers; VAR; BEKK GARCH; Chinese commodity markets (search for similar items in EconPapers)
JEL-codes: C32 C58 D53 G11 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (78)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:93:y:2021:i:c:s0140988320300803

DOI: 10.1016/j.eneco.2020.104741

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