Asymmetric impact of oil structural shocks on non-ferrous metals supply chains: A groundbreaking multidimensional quantile-on-quantile regression

This paper examines the predictability of various oil price shocks on the returns of non-ferrous metals from the supply and demand sides in the US, UK, and China under different market conditions. An innovative multidimensional quantile-on-quantile (MD-QQ) regression approach is proposed to address this topic, which extends traditional univariate QQ regression to multivariate cases, addressing the limitation of omitted variables in the benchmark QQ method. The findings reveal that the forecasting of oil supply shocks on the non-ferrous metal supply chain is generally insignificant. Nevertheless, oil supply shocks will transmit negative (positive) actions when the non-ferrous metal supply-side (demand-side) is in a bear (bull) market. The implication of oil demand shocks on the non-ferrous metal supply chain is generally positive, while the supply-side market of Chinese non-ferrous metals displays mutability in response to oil demand shocks under certain extreme market conditions. Conversely, oil risk shocks have a negative impact across the entire non-ferrous metal supply chain. Their effects are more pronounced when the non-ferrous metal demand market is bearish, exhibiting asymmetric characteristics. Oil demand shocks and risk shocks have a stronger impact on non-ferrous metal supply chains in the US and UK than in China. Our research not only confirms the estimation bias caused by missing variables in traditional baseline models but also provides new insights into the connection between the non-ferrous metals and oil markets by adopting the fresh method.