COVID-19 and China commodity price jump behavior: An information spillover and wavelet coherency analysis

Abstract

Jumps in commodity prices can make asset risk management challenging. This study explores the influence feature of the COVID-19 epidemic on China's commodity price jumps, using 5-min intraday high-frequency futures data of three China's commodity markets (energy, chemical, and metal) from January 23, 2020 to June 10, 2022. We find that firstly the information spillover from the COVID-19 spread situation to China's energy price jumps is relatively weak, and the COVID-19 epidemic shows the most substantial jump information spillover pattern to China's chemical price. The information spillover pattern is time-varying across the COVID-19 spread situation phase. Secondly, there are co-movement patterns between China's commodity price and China/global COVID-19 confirmed cases. This co-movement feature mainly occurs at the medium- or long-run time scales, and varies across commodities. Thirdly, the demand elasticity for China's commodities and its dependence on imports and exports are the main factors influencing the sensitivity of its price jumps to the COVID-19 outbreak.