Multi-Time Scale Spillover Effect of International Oil Price Fluctuation on China’s Stock Markets

Jingran Zhu, Qinghua Song and Dalia Streimikiene
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Jingran Zhu: College of Business, Yancheng Teachers University, Yancheng 224007, China
Qinghua Song: School of Finance, Zhongnan University of Economics and Law, Wuhan 430073, China
Dalia Streimikiene: Kaunas Faculty, Vilnius University, Muitines 8, LT-44280 Kaunas, Lithuania

Energies, 2020, vol. 13, issue 18, 1-29

Abstract: With the continuous increase of China’s foreign-trade dependence on crude oil and the accelerating integration of the international crude oil market and the Chinese finance market, the spillover effect of international oil price fluctuation on China’s stock markets increasingly attracts the attention of the public. In order to explore the impact of international oil price fluctuation on China’s stock markets and the time-varying spillover differences of industry sectors, this study proposes three research hypotheses and constructs a multi-time scale analysis framework based on wavelet analysis and a time-varying t-Copula model. In this paper, we use the Shanghai Composite Index as the representative of a general trend of the stock market, and we use the stock index of the China Securities Industry as the counterpart of industrial sectors. Based on the data from 5 January 2005 to 31 May 2020, this paper measures and analyzes the spillover effect of international oil price fluctuation on China’s stock markets, under different volatility periods. The results show that, firstly, the spillover effect of international oil price fluctuation on the Chinese stock markets is different. In the short and medium volatility period, the changes in international oil price are ahead of the changes in the Chinese stock markets, while the latter is ahead of the former under long-term fluctuations. Secondly, the spillover effect of international oil price fluctuation on China’s industry stock indexes is persistent. As the time scale increases, the tail dependency will increase. Finally, the impact of risk events aggravates the volatility of the stock markets in the short-term, while the mid- to long-term impact mainly affects the volatility trend. Investment risk control can make overall arrangement on the basis of the characteristics of oil price impact under different fluctuation stages.

Keywords: crude oil price; stock market; spillover effect; wavelet analysis; t-Copula model (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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