Cross-category connectedness between Shanghai crude oil futures and Chinese stock markets related to the Belt and Road Initiative

Li Chai, Yuqi Wang and Xiaohong Qi

The North American Journal of Economics and Finance, 2024, vol. 73, issue C

Abstract: This paper aims at investigating the cross-category time-varying frequency connectedness between Shanghai crude oil futures (INE), the CSI Belt and Road theme index, and seven Chinese stock markets affiliated with the Belt and Road Initiative (BRI), namely infrastructure, high-speed railway, green electricity, communication, ferrous metals, agriculture, and new energy markets. Using the novel time-varying parameter VAR (TVP-VAR) frequency connectedness model, we identify how the connectedness between INE and BRI-related stocks varies between the short-term, and long-term investment horizons. Our empirical findings reveal that the connectedness between INE and BRI-related stocks significantly increases during extreme market movements and mainly occurs at shorter time horizons. On the other hand, both INE and BRENT serve as net shock receivers, exhibiting relatively limited connectedness to BRI-related stocks. Notably, the correlation between INE and BRI-related stocks is significantly stronger compared to that observed with BRENT. We also observe that the INE exhibits a relatively strong correlation with infrastructure and ferrous metals compared to other stock markets, displaying a discernible bidirectional spillover effect. Our results document some practical enlightenment for investors and policymakers with various time horizons.

Keywords: Shanghai crude oil futures; Belt and Road Initiative; Chinese stock markets; TVP-VAR frequency connectedness; Spillover effect (search for similar items in EconPapers)
JEL-codes: C22 C58 G15 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:73:y:2024:i:c:s1062940824000901

DOI: 10.1016/j.najef.2024.102165

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