Analysis of the return linkages among international crude oil futures, Chinese stock market and US stock market based on VAR model

Fangying Dong ()
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Fangying Dong: Msc in Finance, EM-Lyon Business School

A chapter in Proceedings of the 9th International Conference on Financial Innovation and Economic Development (ICFIED 2024), 2024, pp 549-557 from Springer

Abstract: Abstract Crude oil, as a primary global energy resource, plays a pivotal role in influencing global financial landscapes, especially in major economies like China and the US. Despite extensive studies, a comprehensive analysis intertwining the three areas—crude oil prices, the Chinese stock market, and the US stock market—using the Vector Autoregression (VAR) model is lacking. This study bridges that gap, examining the interactions among international crude oil futures returns, the Shanghai Composite Index and the S&P 500 Index using 2,954 data sets from January 2011 to August 2023. Findings reveal a strong interconnection with crude oil futures significantly impacting both stock markets. Following disturbances, all markets revert to baseline states, with positive crude oil futures briefly boosting stock markets. However, stock market growth may precede a fall in crude oil futures. Although quantitative, the study's model may not fully align with real-world economic dynamics and carries potential overfitting risks due to its extensive lag order.

Keywords: Crude oil; Stock Market; VAR model; Return (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-408-2_62

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DOI: 10.2991/978-94-6463-408-2_62

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