| Iron ore is the main raw material for iron and steel production,which is of great significance to China’s industrial development and economic growth.However,due to the limitation of low grade and supply of domestic iron ore resources,China’s dependence on international iron ore is increasing year by year.In recent years,China’s import dependence once approached 90%.The increasing gap between supply and demand makes iron ore,as an important resource guarantee for economic development,face the threat of long-term shortage of supply.At the same time,along with the global economic and financial market turmoil and political uncertainty factors increase,the international iron ore and other commodities prices appear abnormal fluctuations,China’s macroeconomy will continue to iron ore price impact of compelling,as a barometer of macro economy and stock market,also hard to avoid the fluctuations in the price of iron ore.Based on this,this paper makes research on the international iron ore price spillover effect between the impact of China’s stock market and the market,is not only beneficial to understand the international iron ore and China’s stock market operation rule,and guard against the financial risk of infection,resulted from the iron ore market fluctuations can also for financial market regulation and provide certain theoretical basis for effective portfolio construction.In this paper,the international iron ore price structure is decomposed into supply,specific demand and global demand shocks from the perspectives of the whole and the industry stock market.The TVP-SVAR-SV model is used to investigate the dynamic impact of iron ore price shocks on the returns of China’s stock market.It is found that there are significant differences in the impact of different types of iron ore price shocks.A rise in iron ore prices,triggered by sudden supply disruptions or precautionary increases in demand,negatively reduces stock market return,whereas global demand shock has a positive impact.The negative impact of the iron ore price impact expanding along the industry chain,in the face of the rise in prices of raw materials,industrial chain upstream industries will cost pressures on to the downstream industry,the downstream industry is restricted by the price elasticity of demand and government control,only by squeezing profits to control the final product price,in order to keep the existing market share.Compared with the yield rate,volatility can better reflect the information exchange and risk spillover between iron ore and China’s stock market.In this paper,DCC-GARCH model and CoVaR are used to investigate the volatility spillover and risk spillover effect between two markets.It is found that frequent cross-market trading results in two-way volatility spillover effect between markets,especially in the economic downturn such as financial crisis,European debt crisis and COVID-19.The risk spillover relationship between markets has an asymmetric effect.Iron ore contributes greatly to the risk spillover of China’s stock market,but it is difficult to form a reverse transmission relationship of the risk of China’s stock market.This is because China has no right of speech in iron ore pricing,and China’s stock market is difficult to influence the international iron ore price.There are obvious volatility spillover and risk contagion relationship between iron ore and stock markets of various industries,but there are significant differences among different industries,and the dynamic correlation coefficient and risk spillover degree of stock markets closely related to iron ore are relatively higher.With the rapid rise of commodity index investment,institutional investors begin to pay attention to the portfolio allocation of international iron ore and financial assets.Frequent capital flow and information transmission increased the possibility of risk contagion.In order to characterize the information spillover and risk transmission between iron ore and Chinese stock market,this paper uses GSADF and the time-varying Granger causality test model to study the spillover relationship between iron ore and Chinese stock market from the special perspective of price bubble.The research results show that there are three bubble spillover relationships in total,one-way bubble spillover from iron ore to the stock market caused by capital rotation in 2014,one-way bubble spillover from the stock market to the iron ore market caused by linkage effect in 2019,and two-way bubble spillover in the post-epidemic era.Price bubbles can easily spill over from market to market through industry markets,and the frequent bubbles show the increasingly close link between iron ore and Chinese stock markets,and provide new evidence of the financialization of the iron ore market.Based on the above research conclusions,the following policy proposals are proposed from the perspectives of the government,financial supervisors and market participants.The government should improve the information transparency of the iron ore market and reduce the preventive demand and excessive speculation caused by information asymmetry.At the same time,it should establish long-term and stable cooperative relations with iron ore suppliers and expand the scale of overseas investment so as to improve the situation that people’s lifeline is subject to others.Financial regulators should attach great importance to the correlation between the stock market and the commodity market,reduce the possibility of risk contagion caused by market correlation,and at the same time play the market supervision function,improve the risk monitoring ability of the stock market and maintain the stability of the financial market.For market participants,when considering portfolio strategies,they should add assets with low correlation to reduce investment risks.Market participants should also pay attention to the potential relationship between the iron ore market and the financial market and follow the development trend of the investment market. |
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