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Dynamic spillover effects and portfolio strategies between crude oil, gold and Chinese stock markets related to new energy vehicle

Zhifeng Dai, Haoyang Zhu and Xinhua Zhang

Energy Economics, 2022, vol. 109, issue C

Abstract: This paper investigates the volatility spillover effects and the dynamic relationships among WTI crude oil, gold and the Chinese stock markets of new energy vehicle, environmental protection, new energy, coal & consumable fuels, high and new technology, by adopting the method of Diebold and Yilmaz (2012, 2014) based on TVP-VAR model. The results indicate that there exists a high interdependence among all analyzed assets, and the total volatility spillover has a sharp increase under the major crisis events. On average, WTI crude oil and gold are the net receivers of the systemic shocks, while all of the analyzed stock markets are the net transmitters of the systemic shocks. Besides, the Granger causality test shows that the volatility of each asset can Granger cause the total connectedness index. Finally, we also calculate optimal hedge ratios, portfolio weights and the corresponding hedging effectiveness based on DCC-GARCH-t copula model. The empirical results show WTI crude oil and gold are cheap hedging tools. When investing a small part in WTI crude oil and a large part in the analyzed stock markets, high hedging effectiveness could be achieved.

Keywords: Volatility spillover; Chinese stock markets; New energy vehicle; Hedge ratios; Portfolio weights; Hedging effectiveness (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.eneco.2022.105959

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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