Trading Risk Spillover Mechanism of Rare Earth in China: New Perspective Based on Time-Varying Connectedness Approach
Our research contributes a new point of view on China’s rare earth dynamic risk spillover measurement; this was performed by combining complex network and multivariate nonlinear Granger causality to construct the time-varying connectedness complex network and analyze the formation mechanism using th...
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| Format: | Article |
| Language: | English |
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MDPI AG
2023-03-01
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| Series: | Systems |
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| Online Access: | https://www.mdpi.com/2079-8954/11/4/168 |
| _version_ | 1797603357403119616 |
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| author | Rendao Ye Jincheng Gong Xinting Xia |
| author_facet | Rendao Ye Jincheng Gong Xinting Xia |
| author_sort | Rendao Ye |
| collection | DOAJ |
| description | Our research contributes a new point of view on China’s rare earth dynamic risk spillover measurement; this was performed by combining complex network and multivariate nonlinear Granger causality to construct the time-varying connectedness complex network and analyze the formation mechanism using the impulse response. First, our empirical research found that for the dynamic characteristics of China’s rare earth market, due to instability, uncertainty, and geopolitical decisions, disruption can be captured well by the TVP-VAR-SV model. Second, except for praseodymium, oxides are all risk takers and are more affected by the impact of other assets, which means that the composite index and catalysts are main sources of risk spillovers in China’s rare earth trading complex network system. Third, from the perspective of macroeconomic variables, there are significant multivariate nonlinear impacts on the total connectedness index of China’s rare earth market, and they exhibit asymmetric shock characteristics. These findings indicate that the overall linkage of the risk contagion in China’s rare earth trading market is strong. Strengthening the interconnections among the rare earth assets is of important practical significance. Empirical results also provide policy recommendations for establishing trading risk protection measures under macro-prudential supervision. Especially for investors and regulators, rare earth oxides are important assets for risk mitigation. When rare earth systemic trading risk occur, the allocation of oxide rare earth assets can hedge part of the trading risk. |
| first_indexed | 2024-03-11T04:29:01Z |
| format | Article |
| id | doaj.art-5b1bebb601464dd8928f57cb3fdae7c7 |
| institution | Directory Open Access Journal |
| issn | 2079-8954 |
| language | English |
| last_indexed | 2024-03-11T04:29:01Z |
| publishDate | 2023-03-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Systems |
| spelling | doaj.art-5b1bebb601464dd8928f57cb3fdae7c72023-11-17T21:35:11ZengMDPI AGSystems2079-89542023-03-0111416810.3390/systems11040168Trading Risk Spillover Mechanism of Rare Earth in China: New Perspective Based on Time-Varying Connectedness ApproachRendao Ye0Jincheng Gong1Xinting Xia2School of Economics, Hangzhou Dianzi University, Hangzhou 310018, ChinaSchool of Economics, Hangzhou Dianzi University, Hangzhou 310018, ChinaSchool of Economics, Hangzhou Dianzi University, Hangzhou 310018, ChinaOur research contributes a new point of view on China’s rare earth dynamic risk spillover measurement; this was performed by combining complex network and multivariate nonlinear Granger causality to construct the time-varying connectedness complex network and analyze the formation mechanism using the impulse response. First, our empirical research found that for the dynamic characteristics of China’s rare earth market, due to instability, uncertainty, and geopolitical decisions, disruption can be captured well by the TVP-VAR-SV model. Second, except for praseodymium, oxides are all risk takers and are more affected by the impact of other assets, which means that the composite index and catalysts are main sources of risk spillovers in China’s rare earth trading complex network system. Third, from the perspective of macroeconomic variables, there are significant multivariate nonlinear impacts on the total connectedness index of China’s rare earth market, and they exhibit asymmetric shock characteristics. These findings indicate that the overall linkage of the risk contagion in China’s rare earth trading market is strong. Strengthening the interconnections among the rare earth assets is of important practical significance. Empirical results also provide policy recommendations for establishing trading risk protection measures under macro-prudential supervision. Especially for investors and regulators, rare earth oxides are important assets for risk mitigation. When rare earth systemic trading risk occur, the allocation of oxide rare earth assets can hedge part of the trading risk.https://www.mdpi.com/2079-8954/11/4/168TVP-VAR-SVcomplex networkmultivariate nonlinear causalityimpulse response |
| spellingShingle | Rendao Ye Jincheng Gong Xinting Xia Trading Risk Spillover Mechanism of Rare Earth in China: New Perspective Based on Time-Varying Connectedness Approach Systems TVP-VAR-SV complex network multivariate nonlinear causality impulse response |
| title | Trading Risk Spillover Mechanism of Rare Earth in China: New Perspective Based on Time-Varying Connectedness Approach |
| title_full | Trading Risk Spillover Mechanism of Rare Earth in China: New Perspective Based on Time-Varying Connectedness Approach |
| title_fullStr | Trading Risk Spillover Mechanism of Rare Earth in China: New Perspective Based on Time-Varying Connectedness Approach |
| title_full_unstemmed | Trading Risk Spillover Mechanism of Rare Earth in China: New Perspective Based on Time-Varying Connectedness Approach |
| title_short | Trading Risk Spillover Mechanism of Rare Earth in China: New Perspective Based on Time-Varying Connectedness Approach |
| title_sort | trading risk spillover mechanism of rare earth in china new perspective based on time varying connectedness approach |
| topic | TVP-VAR-SV complex network multivariate nonlinear causality impulse response |
| url | https://www.mdpi.com/2079-8954/11/4/168 |
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