Bidirectional risk spillover effects between international energy commodities and China’s financial market

The paper examined the risk spillover effects of the international commodity market on China’s financial market through the TVP-VAR-DY model and explored its potential risk correlation channels. The research results showed: Firstly, there was a significant bi-directional spillover effect between international energy commodities and financial markets, with the strength of systemic spillovers primarily driven by energy commodities. Secondly, in terms of static spillover effects, both traditional energy and new energy commodities exerted obvious spillover effects on financial markets, with the former one having stronger spillover effect under the influence of energy consumption structure. From a dynamic perspective, the spillover effect of international energy market on financial markets was more sensitive to extreme exogenous events, exhibiting obvious time-varying characteristics. Finally, from the perspective of driving factors, geopolitical risks and global economic policy uncertainty were important factors leading to energy market spillovers, especially in the new energy market. Accordingly, investors are advised to monitor potential volatility spillovers between these markets and adopt diversified portfolio strategies to hedge risks without compromising returns. Regulators should implement necessary policy measures and establish early warning mechanisms to mitigate the negative impacts of such spillovers and effectively prevent systemic risks.