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Policy impact on volatility dynamics in commodity futures markets: Evidence from China

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  • Yongmin Zhang
  • Shusheng Ding
  • Eric Scheffel

Abstract

Chinese financial markets play an ever more pertinent role in the global economic context and are therefore increasingly relevant for stabilizing the economy. In this paper, we scrutinize the impact of a series of new policies on stock index futures trading, which have recently been enacted by the Chinese government. We pay particular attention to the way in which these have influenced commodity market volatilities and how their impact on liquidity has affected volatility more generally. Our results reveal a novel interaction between the new government policy and market forces which drive volatilities in commodity markets.

Suggested Citation

  • Yongmin Zhang & Shusheng Ding & Eric Scheffel, 2018. "Policy impact on volatility dynamics in commodity futures markets: Evidence from China," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(10), pages 1227-1245, October.
    • Handle: RePEc:wly:jfutmk:v:38:y:2018:i:10:p:1227-1245
    DOI: 10.1002/fut.21905
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    2. Zhang, Yongmin & Ding, Shusheng & Scheffel, Eric M., 2019. "A key determinant of commodity price Co-movement: The role of daily market liquidity," Economic Modelling, Elsevier, vol. 81(C), pages 170-180.
    3. Kathrin Hellmuth & Christian Klingenberg, 2022. "Computing Black Scholes with Uncertain Volatility-A Machine Learning Approach," Papers 2202.07378, arXiv.org.
    4. Gaoxiu Qiao & Yangli Cao & Feng Ma & Weiping Li, 2023. "Liquidity and realized covariance forecasting: a hybrid method with model uncertainty," Empirical Economics, Springer, vol. 64(1), pages 437-463, January.
    5. Mert Demir & Terrence F. Martell & Jun Wang, 2019. "The trilogy of China cotton markets: The lead–lag relationship among spot, forward, and futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(4), pages 522-534, April.
    6. Yongmin Zhang & Shusheng Ding & Haili Shi, 2022. "The impact of COVID‐19 on the interdependence between US and Chinese oil futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(11), pages 2041-2052, November.
    7. Owusu Junior, Peterson & Tiwari, Aviral Kumar & Tweneboah, George & Asafo-Adjei, Emmanuel, 2022. "GAS and GARCH based value-at-risk modeling of precious metals," Resources Policy, Elsevier, vol. 75(C).
    8. Zhang, Yongmin & Ding, Shusheng, 2021. "Liquidity effects on price and return co-movements in commodity futures markets," International Review of Financial Analysis, Elsevier, vol. 76(C).
    9. Yongmin Zhang & Yiru Sun & Haili Shi & Shusheng Ding & Yingxue Zhao, 2024. "COVID-19, the Russia–Ukraine war and the connectedness between the U.S. and Chinese agricultural futures markets," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.
    10. Ding, Shusheng & Zhang, Yongmin, 2020. "Cross market predictions for commodity prices," Economic Modelling, Elsevier, vol. 91(C), pages 455-462.
    11. Yongmin Zhang & Shusheng Ding & Meryem Duygun, 2019. "Derivatives pricing with liquidity risk," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(11), pages 1471-1485, November.

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