Time-frequency return connectedness between Chinese coal futures and international stock indices

Baifan Chen, Jionghao Huang, Danhe Liu and Xiao-Hua Xia

International Review of Economics & Finance, 2024, vol. 89, issue PB, 316-333

Abstract: This paper explores the return connectedness between Chinese coal futures (thermal coal and coking coal) and 16 representative international equity indices from Asia, America, Australia, and Europe. We employ a time-frequency connectedness methodology to capture time-frequency features of the return connectedness between Chinese coal futures and stock indices. The empirical results suggest that return connectedness between Chinese coal futures and equity indices is time-varying and heterogeneous at different frequencies. The evidence also indicates that the short-term (high-frequency) return connectedness is stronger than long-term (low-frequency) during the sample period, implying that high-frequency return connectedness dominates total return connectedness. Meanwhile, Chinese thermal coal futures (TCF) and Chinese coking coal futures (CCT) serve as net receivers of return spillover in the coal-stock connectedness system, whether long-term or short-term. Finally, we detect that the return connectedness between Chinese coal futures and emerging equity markets exceeds developed equity markets. Summarily, the return connectedness between Chinese coal futures and the international stock indices varies depending on the development degree of the equity market, coal varieties, and time-frequency scales. These new findings offer implications for investors, policymakers, and market participants.

Keywords: Return connectedness; Chinese coal futures; Time-frequency connectedness; Equity market (search for similar items in EconPapers)
JEL-codes: C32 E32 F36 G15 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:89:y:2024:i:pb:p:316-333

DOI: 10.1016/j.iref.2023.10.031

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