China's liberalizing stock market,crude oil,and safe-haven assets: A linkage study based on a novel multivariate wavelet-vine copula approach |
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| Institution: | 1. College of Economics and Management, Northwest A&F University, Yangling, Shaanxi, 712100, China;2. Center for China Public Sector Economy Research, Jilin University; Research Center for Quantitative Finance, Jilin University; School of Economics, Jilin University, Changchun, Jilin, 130012, China;1. Aletheia University, Taiwan;2. National Taichung University of Science and Technology, Taiwan;1. McMaster University, 1280 Main St West, Hamilton, Ontario, L8S4M4, Canada;2. Bank of Canada, Canada;1. IMUVa, Universidad de Valladolid, Spain;2. Universidad de Murcia, Spain |
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| Abstract: | China is the world's largest oil importer, and therefore the correlations between stock indices and highly volatile oil prices deserve close examination when investing in China's gradually liberalizing stock market. Another concern for international investors is whether safe-haven assets can reduce portfolio risks for investment in China. The paper makes two main contributions. First, we develop a novel method of examining a multivariate dependence structure by combining wavelet analysis with the vine copula model. Second, we apply the proposed methodology to study the correlations between China's liberalizing stock market, petroleum, and safe-haven assets at different frequencies. We find that the multidimensional dependence of these assets has been altered as a result of the 2008 global financial crisis. Moreover, the vine structures exhibit dependence patterns that vary over time horizons, indicating that the multidimensional dependence is sensitive to time scales. |
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| Keywords: | China's liberalizing stock market Crude oil Safe-haven assets Multivariate dependence structure Wavelet-vine copula approach C32 C58 F37 G11 G14 G15 |
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