Prague Economic Papers 2023, 32(6):659-698 | DOI: 10.18267/j.pep.847

Analysis of Comovement Between China's Commodity Futures and World Crude Oil Prices

Tianding Zhang ORCID...a, Song Zenga, b, Jie Li ORCID...c
a Economics and Management School, Wuhan University, Wuhan, China,
b The HSBC Financial Research Institute, Peking University, Shenzhen, China,
c International Education School, Wuhan University, Wuhan, China

We Examine the Comovement between China's Commodity Futures and World Crude Oil Prices Based on Their Daily Return Series. Using a Dynamic Time-Varying Approach, We Combine the Generalized Autoregressive Score (Gas) Model with the Copula Approach, Allowing for Asymmetry and Tail Dependence. Our Results Demonstrate a Significant Nonlinear Causal Impact of World Crude Oil Prices on Each of China's Commodities. The Comovement between China's Commodity Futures and Crude Oil Prices Is Positive, with Varying Degrees of Significance across Different Commodity Types. Notably, Non-Ferrous Metal and Chemical Commodity Futures Are More Vulnerable to Rising Crude Oil Prices. From a Dynamic Perspective, We Observe Continued Volatility in the Comovement between China's Commodity Futures and World Crude Oil Prices in Recent Years. Moreover, the Time-Varying Dependence between the Three Non-Ferrous Metals and Crude Oil Prices Is Higher than That of Other Commodities. These Findings Hold Significant Implications for Global Investors, Risk Managers and Policymakers.

Keywords: comovement, commodity futures, world crude oil prices, copula
JEL classification: C58, Q02, Q37

Received: January 1, 2023; Revised: July 1, 2023; Accepted: July 31, 2023; Published: December 19, 2023  Show citation

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Zhang, T., Zeng, S., & Li, J. (2023). Analysis of Comovement Between China's Commodity Futures and World Crude Oil Prices. Prague Economic Papers, 32(6), 659-698. doi: 10.18267/j.pep.847
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