LAUSR

Abstract This paper reveals some new evidence on the volatility spillover between fuel oil and stock index futures markets in China by considering its time-variant feature. Time-varying effect is specified by the Legendre polynomials in a DCC GARCH model. Moreover, the semi-nonparametric (SNP) approach accounting for marginal excess kurtosis and asymmetry is applied. We find different time-evolving patterns of volatility spillover across multiple periods due to the structural breaks. The direction of mean volatility spillover is found to be bilateral. Moreover, the strength of mean volatility spillover shows that the effect from stock index to fuel oil futures is much stronger than the other way around. This implies that the stock index futures market plays a leading role in information processing. These findings have important implications for the fuel oil stakeholders as well as risk management.