Exploring shock and volatility transmission between oil and Chinese industrial raw materials

KIRKULAK ULUDAĞ B., Safarzadeh O.

RESOURCES POLICY, cilt.70, 2021 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 70
  • Basım Tarihi: 2021
  • Doi Numarası: 10.1016/j.resourpol.2020.101974
  • Dergi Adı: RESOURCES POLICY
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, Aerospace Database, Aquatic Science & Fisheries Abstracts (ASFA), Business Source Elite, Business Source Premier, Communication Abstracts, EconLit, Index Islamicus, INSPEC, Metadex, PAIS International, Pollution Abstracts, Public Affairs Index, Civil Engineering Abstracts
  • Anahtar Kelimeler: Volatility spillover, OPEC Oil, China, Industrial raw materials, STOCK-MARKET, PRICE SHOCKS, CRUDE-OIL, RETURNS EVIDENCE, SECTOR ANALYSIS, CANADIAN OIL, SPILLOVERS, FLUCTUATIONS, IMPACT, RISK
  • Dokuz Eylül Üniversitesi Adresli: Evet

Özet

The main objective of this paper is to investigate the volatility spillover between oil prices and the Chinese industrial raw materials stock indices including oil, coal, iron and non-ferrous metals. In order to achieve this task, OPEC and WTI oil prices were used as oil benchmarks and several multivariate GARCH models were applied on daily closing prices of stock indices for the period from 2004 through 2014. Among the models, VAR-GARCH model fits the data best. The findings show significant volatility spillover between oil and the Chinese raw materials stock returns. However, the spillover is unidirectional and it is more apparent from past oil shocks to the Chinese raw materials stock returns. This unidirectional spillover can be attributed to the structure of the Chinese stock market, which is slightly integrating into the global stock markets and yet is detached from its own real economy. Moreover, the findings suggest that the conditional correlations of OPEC oil and the Chinese raw materials stock indices are higher than those of WTI oil and stock indices. Overall, the findings have important implications for both portfolio managers and policy makers in terms of risk management.