Volatility Asymmetry and Spillover Effects in Crude Oil Futures Market: Evidence from China

Abstract

In order to study the international influence and function of domestic crude oil futures prices in depth, based on the daily data of 2018-2022, this paper uses Granger causality test, cointegration test, ECM model and several forms of GARCH model to make empirical research on the price correlation, volatility, asymmetry and risk spillover effects of domestic crude oil, Brent crude oil, WTI crude oil and Oman crude oil futures in the three major foreign crude oil markets. The study found that there is a Granger causal relationship and a cointegration relationship between domestic and foreign crude oil futures prices. There are interactions in the crude oil futures markets at home and abroad, and there are different fluctuation patterns in the short-term fluctuation process. There are asymmetries, leverage effects and spillover effects in the volatility of the four crude oil futures markets at home and abroad with different intensities. The bearish news of the three foreign markets is greater than the impact of the bullish news than that of the domestic one. There are risk spillover effects and volatility effects between domestic and the three foreign crude oil futures markets, and the domestic spillover effect on foreign crude oil is greater than the spillover effect on domestic crude oil from abroad. The conclusion is that the international influence of domestic crude oil futures prices is stronger than that of Omani crude oil, and weaker than Brent and WTI crude oil. The leverage effect of the three foreign markets is greater than that of China, and the leverage effect of the Oman crude oil futures market is the strongest. The asymmetry and spillover effect of fluctuations in the domestic and foreign crude oil futures markets lead to the risk and speculation of the three foreign markets being greater than that of the domestic one, and the speculative arbitrage through the domestic and foreign crude oil markets may cause huge market risks, and it is suggested that the internationalization of the domestic futures market needs more systems and mechanisms to support the construction.