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Extreme event shocks and dynamic volatility interactions: The stock, commodity, and carbon markets in China

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  • Zhao, Lili
  • Liu, Wenhua
  • Zhou, Min
  • Wen, Fenghua

Abstract

This study adopts the time-varying parameter vector autoregression approach to examine dynamic volatility interactions of the stock, commodity, and carbon markets in China, with specific focus on the effects of extreme event shocks on market interactions. According to the results, a bidirectional Granger causality is observed between the stock and commodity market volatility, whereas these markets unidirectionally Granger cause the carbon market. Furthermore, the impacts of the carbon market on the stock and commodity markets substantially fluctuate, whereas interactions of the stock and commodity markets are relatively smooth. In particular, sudden extreme events have significant effects on market volatility interactions.

Suggested Citation

  • Zhao, Lili & Liu, Wenhua & Zhou, Min & Wen, Fenghua, 2022. "Extreme event shocks and dynamic volatility interactions: The stock, commodity, and carbon markets in China," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s154461232100578x
    DOI: 10.1016/j.frl.2021.102645
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    Cited by:

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    2. Duan, Kun & Liu, Yang & Yan, Cheng & Huang, Yingying, 2023. "Differences in carbon risk spillovers with green versus traditional assets: Evidence from a full distributional analysis," Energy Economics, Elsevier, vol. 127(PA).
    3. Zhao, Lu-Tao & Liu, Hai-Yi & Chen, Xue-Hui, 2024. "How does carbon market interact with energy and sectoral stocks? Evidence from risk spillover and wavelet coherence," Journal of Commodity Markets, Elsevier, vol. 33(C).
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    6. Chen, Huayi & Shi, Huai-Long & Zhou, Wei-Xing, 2024. "Carbon volatility connectedness and the role of external uncertainties: Evidence from China," Journal of Commodity Markets, Elsevier, vol. 33(C).

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    More about this item

    Keywords

    Market volatility; Dynamic interactions; Commodity market; Stock market; Carbon market;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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