The impact of COVID‐19 on the interdependence between US and Chinese oil futures markets

Abstract

The oil futures market plays a vital role in the global financial system, especially after the negative future oil price rose during the COVID‐19 pandemic. This paper investigates the COVID‐19 impact on the interdependence between the US and Chinese oil futures markets by extending the dynamic conditional correlation‐generalized autoregressive conditional heteroskedasticity (DCC‐GARCH) models with incorporating COVID‐19 variables and by applying vector autoregression (VAR) models. Our study reveals that the COVID‐19 pandemic enhanced the long‐run correlation between the two oil markets. In contrast, daily changes in pandemic severity had a negative effect on the short‐term transient correlation. Our results show that COVID‐19 changed the one‐direction causality from the US oil market to the Chinese market in the pre‐COVID period to a bidirectional causal relation between the two markets during the COVID period. It strengthened the volatility spillover effect from the Chinese to US markets. These findings are helpful to regulars' monitoring oil supply chain risk and investors' cross‐market hedging of spillover risks from a systematic risk perspective.

Time–frequency co-movement and risk connectedness among cryptocurrencies: new evidence from the higher-order moments before and during the COVID-19 pandemic

“…Against this backdrop, investors have become more interested in Bitcoin, so the demand for it continues to rise. A substantial body of literature has confirmed the impacts of the COVID-19 pandemic on contagion effects, interdependence, comovements, risk spillovers, 4 and portfolio diversifications in global traditional financial markets (see Liu et al 2022;Gharib et al 2021;Boubaker et al 2021;Zhang et al 2022a;Narayan et al 2022;Rehman et al 2021;Abuzayed et al 2021;Ali et al 2021). As asserted by Lahmiri and Bekiros (2020), cryptocurrencies have been relatively more volatile than international stock markets during the COVID-19 pandemic.…”

Contemporaneous and noncontemporaneous idiosyncratic risk spillovers in commodity futures markets: A novel network topology approach

“…A number of studies have explored information spillovers among commodity markets (e.g., Z. Liu et al, 2020; Shahzad et al, 2018; Xu et al, 2019), most of which conduct their analysis based on the first and second moments of commodity distributions. Financial asset series typically exhibit thick tails and volatility clustering, so some studies employ GARCH‐type models to explore volatility spillover connectedness among markets, as GARCH models can describe these characteristics well (Ahmed & Huo, 2021; Ma et al, 2021; Maghyereh et al, 2015; Mensi et al, 2014; Wang et al, 2018; Y. Zhang, Ding, et al, 2022). For example, Mensi et al (2014) investigate the return and volatility spillovers between energy and cereal markets based on BEKK‐GARCH and DCC‐GARCH models and find evidence of significant time‐varying spillover effects between these commodity markets.…”

“…Shahzad et al, 2018;Xu et al, 2019), most of which conduct their analysis based on the first and second moments of commodity distributions. Financial asset series typically exhibit thick tails and volatility clustering, so some studies employ GARCH-type models to explore volatility spillover connectedness among markets, as GARCH models can describe these characteristics well (Ahmed & Huo, 2021;Ma et al, 2021;Maghyereh et al, 2015;Mensi et al, 2014;Wang et al, 2018;Y. Zhang, Ding, et al, 2022).…”

Cross‐border and cross‐commodity volatility spillover effects of Chinese soybean futures

“…In addition, considering that the outbreak of COVID‐19 at the end of 2019 caused a huge shock to the world financial markets (Zhang et al, 2022; Zhang & Mao, 2022; Zhang & Wang, 2022), this may affect the comovements between different futures markets. Plus, to explore whether the role of No.1 and No.2 soybean futures has changed with the significant increase in the trading volume of No.2 soybean futures, this study will compare and analyze the differences in soybean volatility spillovers across countries and commodities before and after 2018.…”