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Commodity connectedness of the petrochemical industrial chain: A novel perspective of “good” and “bad” volatility surprises

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  • Yang, Jie
  • Feng, Yun
  • Yang, Hao

Abstract

This paper uses the TVP-VAR-DY approach to investigate the risk transmission among seven China's petrochemical commodities futures, i.e., crude oil and its six downstream products, from the perspective of “good” and “bad” unexpected volatility spillovers. The results show that there are great differences between the dynamics of “good” and “bad” volatility surprise transmission. Linear low-density polyethylene and polypropylene tended to behave as net risk transmitters, and asphalt, PTA, and PVC tended to reactively receive the information spillovers. China's petrochemical commodity futures system was vulnerable to the violent shocks of international oil prices provoked by extreme events.

Suggested Citation

  • Yang, Jie & Feng, Yun & Yang, Hao, 2024. "Commodity connectedness of the petrochemical industrial chain: A novel perspective of “good” and “bad” volatility surprises," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009243
    DOI: 10.1016/j.frl.2024.105894
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    More about this item

    Keywords

    Oil industrial chain; Petrochemical commodity futures; Volatility surprise; Risk transmission;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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