The Spillover Effects among Crude Oil Future Markets under High-Frequency Data Environment: Trivariate VAR-BEKK-GARCH Model Based on Wavelet Multiresolution Analysis

Abstract

With the rapid development of financial globalization, the interconnection of international financial markets has deepened, and the relationship between domestic and international crude oil futures market price fluctuations has been increasingly strengthened. This paper utilizes 1-minute high-frequency price data of INE, WTI, and BRENT crude oil. By employing wavelet multiresolution analysis to address the ‘Calendar Effect’ present in intraday high-frequency data, and decomposing financial time series into different hierarchy of time scales. On this basis, the VAR-BEKK-GARCH model is established to study the spillover effect among the three crude oil future markets from the perspective of different trading cycles. The main conclusions of this paper are as follows: (1) The energy spectrum of wavelet multiresolution analysis shows that the price fluctuations of domestic and international crude oil futures are mainly reflected in the short-term trading cycles of 1-4 minutes; (2) The empirical results of the VAR-BEKK-GARCH model indicate that there are significant bidirectional mean and volatility spillover effects among INE, WTI, and BRENT crude oil in each trading cycle. Specifically, the mean spillover effect between INE and WTI markets shows that the short-term mean spillover effect of INE crude oil on WTI crude oil is larger, which is contrast to the medium- and long-term effect, and there is no significant pattern in the volatility spillover effect. The overall mean and volatility spillover effects of INE crude oil on BRENT crude oil are relatively larger. The overall mean and volatility spillover effects of WTI crude oil on BRENT crude oil are also relatively larger.