Jumps and higher-order moments of crude oil and stock sectors in China: new insights from timescales connectedness

Abstract In the markets of crude oil and stocks, the returns largely deviate from the Gaussian distribution and experience jumps, making the variance of returns a suboptimal measure of risk. Furthermore, participants operate at various investment horizons, indicating the importance of considering frequencies. This paper examines the temporal and spectral spillovers of realized volatility, skewness, kurtosis, and jumps in the Chinese oil-stock sectors, built on 5-min data from March 26, 2018 to July 6, 2023. The main results demonstrate that connectedness in the system of crude oil-stock sectors is moment-, jump-, and frequency-dependent. Crude oil functions as a net recipient of higher-order moments’ shocks from all sectors, especially industrials, materials, and consumer discretionary. Realized volatility connectedness is asymmetric. Realized jump connectedness is more affected by the coronavirus outbreak and the Ukraine crisis than connectedness of realized higher-order moments. Connectedness is generally materialized in the short term, exhibiting heterogeneous responses to crisis periods. Medium- and long-term connectedness of realized volatility is relatively stronger than that of realized skewness, realized kurtosis, and realized jumps. These findings provide important insights into the decision-making process of both short-term traders and long-term investors concerned with higher-order moments and jumps in the Chinese oil-stock (sector) nexus.