Abstract
We analyzed the impact of upside and downside global crude oil price fluctuation on China’s commodity sectors. To do this, we utilized a series of copula functions, both static and dynamic, to assess the average spillovers across marginal and joint extreme movements in the upward/downward directions between crude oil and China’s commodity sectors. The time-varying Copula-conditional value-at-risk (CoVaR) method can well analyze the spillover effects of upside and downside global crude oil price fluctuation on China’s commodity sectors. The weekly data of crude oil price and China’s commodity sectors are applied and the empirical results indicate that there are upside and downside risk spillover effects from global crude oil to China’s commodity sectors. The degree of the downside spillover effect from crude oil price is larger than that of the upside spillover effect, indicating asymmetric spillover effects. Due to the greater impact of downside risk spillover effects on China’s commodity sectors, investors should more carefully consider the downside risk from global crude oil when assessing portfolio risk.
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