Time-frequency higher-order moment Co-movement and connectedness between Chinese stock and commodity markets

Abstract

This study examines the higher-order moment co-movement and connectedness between China's stock and commodity markets across time and frequency domains. We propose wavelet decomposition to develop a multiscale time-varying parameter vector autoregression (TVP-VAR) approach for measuring higher-order moment connectedness. Our empirical findings are as follows: First, the co-movement of stock-commodity varies over time and across different frequencies, exhibiting heterogeneity at different moments. Stocks demonstrate robust co-movement with commodities over the medium- and long-term periods. Second, higher-order moment connectedness is stronger than return connectedness, whereas weaker than volatility connectedness. Finally, higher-order moment connectedness is highly event-dependent, peaking at COVID-19 onset. And long-run factors have the greatest effect on dynamic moment connectedness.