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<p>This study examines the dynamic interdependence among Chinese crude oil futures traded on the Shanghai International Energy Exchange (INE), global oil benchmarks (WTI and Brent), and international equity markets in developed and emerging economies from March 2018 to May 2024 to identify nonlinear relationships, higher-order interactions, and tail-risk behavior. By extending the traditional connectedness framework, it uses a novel Connections-of-Connections (CoC) framework along with quantile time–frequency connectedness based on a quantile vector autoregression (QVAR) model. The CoC method enables analysis not only of direct market linkages but also of how shifts in one market affect correlations and causality among other markets across short-, medium-, and long-term horizons. Results show that Chinese crude oil futures exhibit weak, time-varying nonlinear correlations with WTI, Brent, developed, and emerging equity markets, with both correlation and causality decreasing as the investment horizon lengthens, thereby offering greater diversification and hedging opportunities. Additionally, the quantile time–frequency analysis indicates that INE crude oil futures primarily serve as risk absorbers, particularly during extreme market conditions, with significantly higher risk inflows during downturns and upturns relative to normal periods. This asymmetric spillover behavior distinguishes Chinese crude oil futures from global benchmarks (WTI and Brent) and underscores their unique role in portfolio risk management. The portfolio rebalancing analysis reveals that the rebalancing frequency is crucial: quarterly rebalancing benefits risk-averse investors by limiting downside risk, whereas weekly rebalancing yields higher cumulative returns for risk-tolerant investors. Overall, these findings offer new insights into the diversification, hedging, and rebalancing potential of Chinese crude oil futures in global oil–equity portfolios, with practical implications for investors in increasingly integrated energy and financial markets.</p>

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Global crude oil futures and international equity markets: portfolio diversification and rebalancing in the presence of Chinese crude oil future

  • 期刊论文

  • 发表日期：

    2026年7月27日

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  • Zulfiqar Ali Imran,
  • Mobeen Ahmad,
  • Khurram Shahzad,
  • Muhammad Ahad

摘要

This study examines the dynamic interdependence among Chinese crude oil futures traded on the Shanghai International Energy Exchange (INE), global oil benchmarks (WTI and Brent), and international equity markets in developed and emerging economies from March 2018 to May 2024 to identify nonlinear relationships, higher-order interactions, and tail-risk behavior. By extending the traditional connectedness framework, it uses a novel Connections-of-Connections (CoC) framework along with quantile time–frequency connectedness based on a quantile vector autoregression (QVAR) model. The CoC method enables analysis not only of direct market linkages but also of how shifts in one market affect correlations and causality among other markets across short-, medium-, and long-term horizons. Results show that Chinese crude oil futures exhibit weak, time-varying nonlinear correlations with WTI, Brent, developed, and emerging equity markets, with both correlation and causality decreasing as the investment horizon lengthens, thereby offering greater diversification and hedging opportunities. Additionally, the quantile time–frequency analysis indicates that INE crude oil futures primarily serve as risk absorbers, particularly during extreme market conditions, with significantly higher risk inflows during downturns and upturns relative to normal periods. This asymmetric spillover behavior distinguishes Chinese crude oil futures from global benchmarks (WTI and Brent) and underscores their unique role in portfolio risk management. The portfolio rebalancing analysis reveals that the rebalancing frequency is crucial: quarterly rebalancing benefits risk-averse investors by limiting downside risk, whereas weekly rebalancing yields higher cumulative returns for risk-tolerant investors. Overall, these findings offer new insights into the diversification, hedging, and rebalancing potential of Chinese crude oil futures in global oil–equity portfolios, with practical implications for investors in increasingly integrated energy and financial markets.