Linkages between crude oil and emerging Asian stock markets: New evidence from the Chinese stock market crash

This study examines the return and volatility transmission between gold and nine emerging Asian Stock Markets during the global financial crisis and the Chinese stock market crash. We use the VAR-AGARCH model to estimate return and volatility spillovers over the period from January 2000 through June 30, 2018. The results reveal the substantial return and volatility spillovers between the gold and emerging Asian stock markets during the global financial crisis and the Chinese stock market crash. However, these return and volatility transmissions vary across the pairs of stock markets and the financial crises. Besides, we analyze the optimal portfolios and hedge ratios between gold and emerging Asian stock markets during all sample periods. Our findings have important implications for effective hedging and diversification strategies, asset pricing and risk management.

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Linkages between gold and emerging Asian stock markets: New evidence from the Chinese stock market crash

Studies of Applied Economics ◽

10.25115/eea.v39i1.3016 ◽

2020 ◽

Vol 39 (1) ◽

Cited By ~ 1

Author(s):

Imran Yousaf ◽

Shoaib Ali

Keyword(s):

Financial Crisis ◽

Stock Market ◽

Stock Markets ◽

Global Financial Crisis ◽

Chinese Stock Market ◽

Stock Market Crash ◽

Volatility Spillovers ◽

Hedge Ratios ◽

The Global Financial Crisis ◽

New Evidence

This study examines the return and volatility transmission between gold and nine emerging Asian Stock Markets during the global financial crisis and the Chinese stock market crash. We use the VAR-AGARCH model to estimate return and volatility spillovers over the period from January 2000 through June 30, 2018. The results reveal the substantial return and volatility spillovers between the gold and emerging Asian stock markets during the global financial crisis and the Chinese stock market crash. However, these return and volatility transmissions vary across the pairs of stock markets and the financial crises. Besides, we analyze the optimal portfolios and hedge ratios between gold and emerging Asian stock markets during all sample periods. Our findings have important implications for effective hedging and diversification strategies, asset pricing and risk management.

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The optimal thermal causal path analysis on the relationship between international crude oil price and stock market

Kybernetes ◽

10.1108/k-04-2017-0139 ◽

2018 ◽

Vol 47 (6) ◽

pp. 1242-1261 ◽

Cited By ~ 2

Author(s):

Can Zhong Yao ◽

Peng Cheng Kuang ◽

Ji Nan Lin

Keyword(s):

Stock Market ◽

Crude Oil ◽

Stock Markets ◽

Oil Prices ◽

Oil Price ◽

Chinese Stock Market ◽

Crude Oil Price ◽

Content Type ◽

Crude Oil Prices ◽

Causal Path

Purpose The purpose of this study is to reveal the lead–lag structure between international crude oil price and stock markets. Design/methodology/approach The methods used for this study are as follows: empirical mode decomposition; shift-window-based Pearson coefficient and thermal causal path method. Findings The fluctuation characteristic of Chinese stock market before 2010 is very similar to international crude oil prices. After 2010, their fluctuation patterns are significantly different from each other. The two stock markets significantly led international crude oil prices, revealing varying lead–lag orders among stock markets. During 2000 and 2004, the stock markets significantly led international crude oil prices but they are less distinct from the lead–lag orders. After 2004, the effects changed so that the leading effect of Shanghai composite index remains no longer significant, and after 2012, S&P index just significantly lagged behind the international crude oil prices. Originality/value China and the US stock markets develop different pattens to handle the crude oil prices fluctuation after finance crisis in 1998.

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Financial Risk Contagion in Stock Markets: Causality and Measurement Aspects

Sustainability ◽

10.3390/su11051402 ◽

2019 ◽

Vol 11 (5) ◽

pp. 1402 ◽

Cited By ~ 2

Author(s):

Guoxiang Xu ◽

Wangfeng Gao

Keyword(s):

Stock Market ◽

Emerging Markets ◽

Stock Markets ◽

Financial Risk ◽

Tail Dependence ◽

Chinese Stock Market ◽

Contagion Effect ◽

Subprime Mortgage ◽

Stock Market Crash ◽

Mortgage Crisis

As global financial markets become highly dependent on each other, risk contagion among stock markets is a primary feature of progressing globalization, which poses uncertainties for government agencies. The deficiency of previous studies is that it is difficult to accurately grasp the direction of risk diffusion in different time periods, and to depict the intensity of risk contagion constantly. Research on causality and measurement of financial risk contagion based on nonlinear causality tests and dynamic Copula methods will help governments to allocate financial resources reasonably and effectively, thus promoting the sustainable development of the social economy and financial markets. Taking the Chinese stock market as an example, this paper evaluated the risk contagion effect between the Chinese stock market and six other stock markets including developed and emerging markets from January 2006 to December 2018. From the aspect of causality, the nonlinear Granger causality test was applied to the entire time period and the phased time periods involving specific events like the subprime mortgage crisis and the Chinese stock market crash. From the aspect of measurement, the dynamic Markov state transition Copula model was used to describe the asymmetrically dependent structure of markets, from which was derived the time-varying lower tail dependence coefficients. The results have been summarized as follows. Firstly, after the outbreak of the subprime mortgage crisis, the stock markets in developed and emerging markets unilaterally affected the Chinese stock market, indicating that China was the recipient at this stage. Then, after the outbreak of the Chinese stock market crash, the Chinese stock market had a risk contagion effect on both Japanese and Russian stock markets, indicating that China became a source of financial risk contagion within a limited area at this stage. Lastly, in terms of the degree of risk contagion, the lower tail dependence coefficients of the Chinese stock market and other markets were significantly increased after the occurrence of specific risk events, while the risk contagion degree of developed markets was higher than that of emerging markets. Policymakers can recognize and apply the characteristics of risk contagion at different stages to refrain from unreasonable institutional arrangements, thus improving the sustainability of economic development.

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Return and Volatility Transmissions between Metals and Stocks: A Study of the Emerging Asian Markets by Using the VAR-AGARCH Approach

Asia Pacific Journal of Operational Research ◽

10.1142/s0217595920400205 ◽

2020 ◽

pp. 2040020

Author(s):

Imran Yousaf ◽

Shoaib Ali ◽

Wing-Keung Wong

Keyword(s):

Stock Market ◽

Stock Markets ◽

Global Financial Crisis ◽

Precious Metals ◽

Entire Period ◽

Chinese Stock Market ◽

Stock Market Crash ◽

Hedge Ratios ◽

The Global Financial Crisis ◽

Industrial Metals

This study examines the return and volatility transmission/spillover between (Precious and Industrial) metals and stocks in the emerging Asian markets in the entire studying period and the two crisis sub-periods: the global financial crisis (GFC) and the Chinese Stock market crash sub-periods, and the normal sub-period that does not have any crisis. In addition, we estimate the optimal weights and hedge ratios for both metals and stocks. Employing the VAR-AGARCH model to estimate spillover, the results reveal the unidirectional return spillover from both precious and industrial metals to most of the Asian equity markets in the entire period as well as in the GFC and normal sub-periods but not the sub-period of the Chinese stock market crash. Besides, we reveal that there are unidirectional or bidirectional volatility transmissions between most of the precious metals and the Asian stock markets during the entire period and all the sub-periods. In contrast, the volatility spillover is not significant between most of the industrial metals and Asian stock markets during the entire period and all the sub-periods. On the other hand, our analysis on both optimal weight and hedge ratios suggests that adding nearly any metal to a portfolio of emerging Asian stocks improves its risk-adjusted return and helps to effectively hedge against stock risk exposure over both crisis and non-crisis sub-periods. Overall, these findings provide useful insights for portfolio diversification, asset pricing, and risk management.

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An Empirical Analysis of the Volatility Spillover Effect between World-Leading and the Asian Stock Markets: Implications for Portfolio Management

Journal of Risk and Financial Management ◽

10.3390/jrfm13100226 ◽

2020 ◽

Vol 13 (10) ◽

pp. 226

Author(s):

Imran Yousaf ◽

Shoaib Ali ◽

Wing-Keung Wong

Keyword(s):

Financial Crisis ◽

Stock Market ◽

Stock Markets ◽

Chinese Stock Market ◽

Stock Market Crash ◽

Optimal Weights ◽

Hedge Ratios ◽

The Us ◽

The Usa ◽

Us Financial Crisis

This study employs the Vector Autoregressive-Generalized Autoregressive Conditional Heteroskedasticity (VAR-AGARCH) model to examine both return and volatility spillovers from the USA (developed) and China (Emerging) towards eight emerging Asian stock markets during the full sample period, the US financial crisis, and the Chinese Stock market crash. We also calculate the optimal weights and hedge ratios for the stock portfolios. Our results reveal that both return and volatility transmissions vary across the pairs of stock markets and the financial crises. More specifically, return spillover was observed from the US and China to the Asian stock markets during the US financial crisis and the Chinese stock market crash, and the volatility was transmitted from the USA to the majority of the Asian stock markets during the Chinese stock market crash. Additionally, volatility was transmitted from China to the majority of the Asian stock markets during the US financial crisis. The weights of American stocks in the Asia-US portfolios were found to be higher during the Chinese stock market crash than in the US financial crisis. For the majority of the Asia-China portfolios, the optimal weights of the Chinese stocks were almost equal during the Chinese stock market crash and the US financial crisis. Regarding hedge ratios, fewer US stocks were required to minimize the risk for Asian stock investors during the US financial crisis. In contrast, fewer Chinese stocks were needed to minimize the risk for Asian stock investors during the Chinese stock market crash. This study provides useful information to institutional investors, portfolio managers, and policymakers regarding optimal asset allocation and risk management.

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