Understanding interconnections among steel, coal, iron ore, and financial assets in the US and China using an advanced methodology

Mehrad Asadi, Aviral Tiwari, Samad Gholami, Hamid Reza Ghasemi and David Roubaud

International Review of Financial Analysis, 2023, vol. 89, issue C

Abstract: The chief purpose of this research is to test nexuses among steel, coal, iron ore, and financial assets in the US and China. To do this, we employ Diebold and Yilmaz's (2012) framework based on quantile VAR and a combination of the GJR-GARCH model with Diebold and Yilmaz (2012), providing an opportunity to remedy econometric defects in previous studies. The outcomes demonstrate that lower and upper quantiles properly perform in comparison with the conditional mean, signifying that gauging connectedness the average mean is not capable of producing corroborative evidence. Other results confirm there are bidirectional links between steel and the S&P500, and the USD effects on iron ore and coal are not significant. Moreover, iron ore is the second contributor of shocks to the steel market, whereas coal does not significantly affect the steel market. Regarding Chinese financial assets, Shanghai stock receives the highest shocks from steel, and noticeably, the second significant contributor to steel volatility shocks is Shanghai stock. Plus, the USD/CNY gives shocks to steel. From a practical point of view, our findings will be helpful in developing market participants' consciousness regarding price volatility shocks of bulk commodities and financial assets.

Keywords: Diebold-Yilmaz connectedness methodology; Quantile spillover; Dynamic spillover; Steel; Coal; Iron ore; The US; China (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:89:y:2023:i:c:s1057521923003058

DOI: 10.1016/j.irfa.2023.102789

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