A Financial Analysis on Chinese Steel Markets and the German Automobile Industry

International relations, supply chains, and marketing can have direct impacts on today's automotive industry. Therefore, market participants must monitor and evaluate complementary industrial structures and commodities such as Brent crude oil, metals, and the import and export characteristics of these commodities. This article analyses the financial returns of three automotive giants on the major exchanges and the returns of Chinese steel futures as a commodity. It is interesting to note that the economic movements of steel, the industry's main commodity, are statistically insignificant for two automotive giants and insignificant for one. The analysis utilises the Markov Regime Switching Model. These models are used to provide additional insight into data relationships under certain conditions, such as non-stationarity, heteroskedasticity, and structural change, by dividing the data into regimes. This research addresses the research gap regarding the financial relationship between the stock returns of automotive giants and the dominant market returns of their major complements.