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Intra-day co-movements of crude oil futures: China and the international benchmarks

Author

Listed:
  • Qiang Ji

    (Chinese Academy of Sciences)

  • Dayong Zhang

    (Southwestern University of Finance and Economics)

  • Yuqian Zhao

    (University of Essex)

Abstract

Investigating the co-movements between crude oil futures helps to understand the integration of the global markets. This paper focuses on Shanghai crude oil futures (INE) and study its co-movements with the international benchmarks of WTI and Brent crude oil futures in intra-day day and night trading sessions. A complex network model framework is proposed to analyse the intra-day co-movement patterns labelled by a functional data clustering approach on intra-day return curves. Our findings indicate INE is more integrated with the global market during the night session, but it shows a regional fractional effect during the day session. Based on the revealed dynamics of co-movement patterns, we further design a pairs trading strategy between INE crude oil futures and the international benchmarks. The simulation results show that the pairs trading strategy can be promisingly profitable, even during market turmoil phases.

Suggested Citation

  • Qiang Ji & Dayong Zhang & Yuqian Zhao, 2022. "Intra-day co-movements of crude oil futures: China and the international benchmarks," Annals of Operations Research, Springer, vol. 313(1), pages 77-103, June.
    • Handle: RePEc:spr:annopr:v:313:y:2022:i:1:d:10.1007_s10479-021-04097-x
    DOI: 10.1007/s10479-021-04097-x
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    Cited by:

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    4. Jiawen Luo & Oguzhan Cepni & Riza Demirer & Rangan Gupta, 2022. "Forecasting Multivariate Volatilities with Exogenous Predictors: An Application to Industry Diversification Strategies," Working Papers 202258, University of Pretoria, Department of Economics.

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    More about this item

    Keywords

    INE Crude oil futures; WTI and Brent; Intra-day co-movement patterns; Complex network model; Pairs trading;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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