Can the price fluctuations of Shanghai crude oil futures affect Asian financial markets? Evidence from the time and frequency dynamics analysis of spillover connectedness

Yimin Wu (), Rosmanjawati Abdul Rahman () and Qiuju Yu ()
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Yimin Wu: Universiti Sains Malaysia
Rosmanjawati Abdul Rahman: Universiti Sains Malaysia
Qiuju Yu: Universiti Sains Malaysia

Portuguese Economic Journal, 2025, vol. 24, issue 2, No 4, 269 pages

Abstract: Abstract The dependence between crude oil and price movements in financial markets has always been of great concern. The COVID-19 pandemic has increased the dependence between various financial markets. This study attempts to use network spillover methods to investigate the volatility spillover effects between crude oil futures markets and the Asian oil importing countries stock markets and to evaluate the spillover effect due to the COVID-19 pandemic. The results find that the stock markets of major oil-importing countries in Asia show a certain degree of interconnectedness with the crude oil futures market in terms of return and volatility series, implying that there is a tight information transfer between them. At the early stage of COVID-19, all the connectedness between the markets shows a significant enhancement, while the volatility spillover index changes more drastically, suggesting that it is more affected by the epidemic. Moreover, Shanghai crude oil futures is the recipient of the spillover effect, indicating that its price is more vulnerable to external influences and faces more uncertainty. The results provide new evidence that the Shanghai crude oil futures market is still vulnerable to the uncertainty of Asian financial markets and provide suggestions for the development of the Shanghai crude oil futures market.

Keywords: Network connectedness; Crude oil future; Volatility spillovers; Forecast error variance decomposition; B23; C32; G15 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10258-024-00262-9

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