Research On The Spillover Effects Of Geopolitical Risks On China's Commodity Marke

In the context of the country’s efforts to promote the "Go globally" strategy,the new round of BRICS cooperation focuses on building a regional trading center for commodities,aiming to strengthen food and energy cooperation among the five countries,and improve the security level of the bulk commodity markets.Taking geopolitical risk into consideration in the commodity markets will help to explore new trading cooperation mechanisms for building the BRICS international commodity trading platform and provide a basis for investors to prevent risk comovement of international commodity price fluctuations.In view of the spillover effect of geopolitical risks in the BRICS countries,we firstly establish a market asset pricing theoretical model that introduces geopolitical uncertainty from a theoretical perspective.Secondly,based on the two spillover index model of Lastrapes & Wiesen and Baruník & K?ehlík,we verify the risk spillover of geopolitics from the perspective of time and frequency domain,so as to form a qualitative and quantitative understanding of the spillover effects between the geopolitical risks of BRICS countries and China’s commodity markets.The main conclusions of this paper are as follows: First,geopolitical risk,as an uncertainty,will have a direct linkage to the commodity market,and the existence of this signaling effect is different in time span.Second,The biggest contributors to the systemic total spillover effect are copper,gold and edible oil,which can reflect the strong information transmission between the three commodities.Third,the geopolitical risks of BRICS countries are currently subject to large spillover effects from commodity price fluctuations,which are mainly risk receiver in the system.Especially under extreme events,their external risk spillover diffusion is strengthened,and there is a trend of transitioning from information receivers to transmitters.Fourth,from the frequency domain,the mean spillover between geopolitical risk and other commodity markets is more significant in the short term,there is persistence of spillovers in the medium to long term.Finally,in terms of sub-markets,the geopolitical risks of the BRICS countries have the most significant impacts on the energy market,the energy market has always been the recipient of information on geopolitical risks;Gold exhibits certain hedging properties;Compared to the spillover effect of the agricultural markets,it is more effective in the medium to long term,mainly due to the lag in the transmission mechanism of inflation.