Extreme Connectedness Across Chinese Stock and Commodity Futures Markets

Walid Mensi, Farzaneh Ahmadian-Yazdi, Sami Al-Kharusi, Soheil Roudari and Sang Hoon Kang

Research in International Business and Finance, 2024, vol. 70, issue PA

Abstract: This study examines the price spillovers and connectedness among stock markets, the Shanghai Stock Exchange Composite (SSEC) index, Hang Seng index, Shenzhen Stock Exchange (SZSE) index, commodity futures markets, Aluminum (AL), Gold (AU), Copper (CU), Zinc, Steel Rebar, and Natural Rubber in bearish and bullish market situations. We use the quantile connectedness approach of Ando et al. (2022) to calculate hedge coverage ratios, optimal portfolio weights, and hedge coverage effectiveness. Our empirical analysis yields several important results. First, there is no difference in the results of the TVP-VAR-DY and TVP-VAR models in relation to the magnitude of return transmission during the sample period. Second, CU is the main transmitter and AU is the main receiver of shocks from the network. Third, under the QVAR method estimations, the CU (AU) is the major (minor) contributors to the network during the normal, bearish, and bullish market statuses. Fourth, the results of the hedge ratio strategy confirm that CU and AU are respectively the most and the least expensive assets for a long-term investment in the Chinese stock market in different market conditions.

Keywords: Commodity; Chinese stock market; spillover; quantile; hedging cost (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:70:y:2024:i:pa:s0275531924000928

DOI: 10.1016/j.ribaf.2024.102299

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