The effect of global oil price shocks on China's precious metals market: A comparative analysis of gold and platinum

Chuanguo Zhang, Xueyang Shi, Danlin Yu

Research output: Contribution to journalArticle

9 Scopus citations

Abstract

This paper investigated the impacts of global crude oil price shocks on China's precious metals market using the meliorated autoregressive conditional jump intensity (ARJI) model (Chan and Maheu, 2002) and the extended autoregressive moving average-generalized autoregressive conditional heteroscedasticity (ARMA-GARCH) (Gronwald, 2012), based on the comparative analysis of gold and platinum markets. The results showed that discrete jumps existed in the crude oil market. Considering the volatility clustering of oil returns, the effect of oil price expected shocks on precious metals market was negative (−0.7025,-1.3341), due to the profitability of capital; While that of unexpected shocks was positive (0.0211,0.0645), which can be explained by the adaptive expectation theory. In terms of discrete jumps, the impact of current jumps on precious metals market was significantly negative (−1.4810,-2.6775), according to the risk transmission theory, and the responses tended to be characterized by “overreactions”. In addition, some evidence also suggested permanent volatility effects in China's precious metals market.

Original languageEnglish
Pages (from-to)652-661
Number of pages10
JournalJournal of Cleaner Production
Volume186
DOIs
StatePublished - 10 Jun 2018

Keywords

  • ARJI model
  • ARMA-CSGARCH model
  • Crude oil market
  • Oil price shocks
  • Precious metals market
  • Spillover effects

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