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Connectedness and hedging effects among China's nonferrous metal, crude oil and green bond markets: An extreme perspective

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  • Chen, Yongfei
  • Wei, Yu
  • Bai, Lan
  • Zhang, Jiahao
  • Wang, Zhuo

Abstract

The interactions between nonferrous metal and crude oil markets have been wildly discussed in recent years. However, these interaction effects under extreme bearish and bullish market conditions are rarely investigated. This paper aims to quantify not only the extreme connectedness effects between China's nonferrous metal and crude oil futures markets, but also the hedging benefits of green bond on the nonferrous metal and crude oil futures portfolios. The empirical results show that China's nonferrous metal, crude oil and green bond markets are very closely connected under extreme bearish and bullish market conditions with no clear asymmetry. Moreover, the China's green bond can provide moderate hedging benefits to the nonferrous metal and crude oil futures portfolios even in extreme market environments, and these benefits are stable across different allocation methods.

Suggested Citation

  • Chen, Yongfei & Wei, Yu & Bai, Lan & Zhang, Jiahao & Wang, Zhuo, 2023. "Connectedness and hedging effects among China's nonferrous metal, crude oil and green bond markets: An extreme perspective," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323004130
    DOI: 10.1016/j.frl.2023.104041
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    Cited by:

    1. Gao, Wang & Wei, Jiajia & Zhang, Hongwei & Zhang, Haizhen, 2024. "Does climate policy uncertainty exacerbate extreme risk spillovers between green economy and energy metals?," Resources Policy, Elsevier, vol. 91(C).
    2. Xianling Ren & Xinping Yu, 2024. "Hedging performance analysis of energy markets: Evidence from copula quantile regression," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(3), pages 432-450, March.
    3. Kong, Fanna & Gao, Zhuoqiong & Oprean-Stan, Camelia, 2023. "Green bond in China: An effective hedge against global supply chain pressure?," Energy Economics, Elsevier, vol. 128(C).
    4. Wu, Ruirui & Li, Bin & Qin, Zhongfeng, 2024. "Spillovers and dependency between green finance and traditional energy markets under different market conditions," Energy Policy, Elsevier, vol. 192(C).

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    More about this item

    Keywords

    Nonferrous metals; Crude oil; Green bond; Hedging effects; Quantile VAR;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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