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The impact of co-movements in international commodity idiosyncratic volatility on China’s financial market risk

Author

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  • Li, Shuping
  • Yao, Xiaoyang
  • Li, Jianfeng

Abstract

This study applies the generalized dynamic factor model (GDFM), TVP-VAR-DY framework, and pattern causality to investigate spillover effect from international commodity idiosyncratic volatility co-movements to China’s financial market risk, as well as the impact of a series of macroeconomic factors on such spillover effect. The empirical results indicate that the idiosyncratic volatility co-movements of energy, industrial metals, precious metals, soft commodities, and agricultural products all have significant spillover effects on China’s financial market risk. The influence of commodity idiosyncratic co-movements on China’s financial market risk is relatively stable under normal economic conditions but intensifies significantly during periods of deteriorating economic fundamentals. Macroeconomic factors such as international capital flows, investor sentiment, geopolitical risks, economic conditions, and international freight rates predominantly exhibit a positive causal effect on the dynamic spillover effect.

Suggested Citation

  • Li, Shuping & Yao, Xiaoyang & Li, Jianfeng, 2026. "The impact of co-movements in international commodity idiosyncratic volatility on China’s financial market risk," Research in International Business and Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:riibaf:v:82:y:2026:i:c:s0275531925005045
    DOI: 10.1016/j.ribaf.2025.103248
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