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The dynamics of oil on China’s commodity sectors: What can we learn from a quantile perspective?

Bi-Bo Wu

Journal of Commodity Markets, 2021, vol. 23, issue C

Abstract: I employ the rolling quantile regression, the quantile-on-quantile (QQ) method and the quantile coherency (QC) approach with hedging effectiveness (HE) index to investigate the dynamics of global crude oil on China’s commodity sectors and hedging effectiveness of oil market for China’s commodity sectors. The main results show that the coefficients of rolling window quantile regression vary across periods and are affected easily by some extreme events such as the GFC and recent COVID-19. By utilizing the QQ approach, it’s revealed that the dynamic effects of oil on commodity sectors have heterogeneity and asymmetry. Furthermore, the high-frequency trading in the oil and commodity market may receive higher benefits and the investors can also gain profits in some crisis or bad market situations. In addition, we can see the strong heterogeneity in the hedging effectiveness, and there is some evidence that the oil market is an effective hedge heaven for China’s commodity.

Keywords: Oil; Commodity sectors; Quantile; Hedging effectiveness (search for similar items in EconPapers)
JEL-codes: G15 Q43 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jcomm.2020.100158

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