Volatility Spillovers And Asymmetric Effects Between Crude Oil,New Energy And Rare Earth Markets In China

Extreme commodity price volatility and extreme energy price volatility have become worrying issues in the world economic field,among which price volatilities of crude oil and rare earth markets are particularly notable.With the inflow of a large amount of capital in recent years,the process of financialization of energy and commodities has become increasingly significant.As a consequence,the uncertainty of energy and commodity prices has become increasingly intensified.For investors,the uncertainty of prices will directly determine the choice of investment portfolio.Under the background of global warming,frequent occurrence of extreme environmental problems and increasing attention to energy crisis,the uncertainty of energy price directly affects the choice of energy consumption in the future.If energy prices remain low,the development of new energy is inevitably hindered.It can be seen that traditional energy prices,commodity prices and the development of new energy have formed a complex integration.The development of new energy,as well as the exploitation and development of rare earth resources can't be separated from the financial support of relevant government policies in this context.The investment in new energy and rare earth markets mainly comes from two channels: policy support(investment subsidies and tax incentives)and private investment(venture capital and personal investment).Among them,the most direct support for new energy and rare earth research and development is financing from the stock market.The stock market can raise funds,optimize the allocation of resources,and disperse risks.The price of listed companies is a comprehensive reflection of information from the market,investors,operators and other aspects,and only under the condition of good operating conditions of each company will attract stable investment,which puts forward higher requirements for the operation and income of each company.Therefore,under the background of financialization of large capital inflows,growing in the oil price and the price uncertainty,risk rising environment(energy market and commodity market price volatilities will directly affect the investment choices of investors and listed companies' financing situation),the study of oil,new energy and rare earths which are closely related to new energy help understand the changes in the energy markets,better play a role of rare earth futures markets and corporate finance.In context of the drastic volatility in energy markets,research on the volatility spillovers between different markets has become a hot topic.Volatility spillover can measure to what extent the shock of one kind of asset can influence another and is interpreted as the proxy of the transmission of information.In the same time,the volatility spillovers and price uncertainty have direct influence on the investment sentiment in the market.To investigate the volatility spillover and investment sentiment,this article firstly use widely applied in the field of volatility spillover,the MGARCH method to study the volatility spillover effects between crude oil,new energy and rare earths market from department level.Moreover,from the firm level,the DY index proposed by Diebold and Yilmaz(2012)and high frequency data are employed in the paper.Finally,considering the significant impact of price volatility and uncertainty on investment in new energy and rare earth markets,the asymmetric spillover index(SAM)proposed by Barunik(2016)is used to explore investor sentiment towards rare earth and various types of new energy investment in the stock market.The conclusion shows that: first,there is a high level long-term dynamic correlation between China's rare earth market and the new energy market,and the dynamic correlation coefficient of the two markets fluctuates around 0.8 for a long time,which indicates that China's rare earth market and the new energy market are closely related,which is consistent with the reality that rare earth elements are widely used in the new energy field.Second,there is a pairwise fluctuation spillover effect between the crude oil and rare earth markets,and a significant pairwise fluctuation spillover effect between the rare earth market and the new energy market.The crude oil and rare earth market,rare earth market and new energy market all have pairwise fluctuation overflow,which indicates that the price fluctuation caused by an unexpected event on one side will be transmitted to the other side,which indicates that the prices of international oil and rare earth related product soaring and plummeting in recent years related to some extent.At the same time,it also shows that the rare earth market will act as a bridge for the spillover of fluctuations between the international oil and new energy markets,and there will be a transmission effect on the fluctuations between the two.Third,different listed companies in China's rare earth market play different roles in the transmission of fluctuations and risks in the international oil and new energy markets,and the effect of amplifying and narrowing fluctuations shows a dynamic change over time.This may be related to the market size of each company,the main business area and the dynamic adjustment of business over time.Fourth,most investors in the rare earth market and new energy market are risk averse and sensitive to negative news in the market.This shows that the investment or speculation of all kinds of new energy are relatively pessimistic and investment from Chinese stock market is not the main source of the development of new energy.