Does Price increases in Chinese Stock Index cause Brent Crude Oil Index? Applying Threshold Cointegration Regression

Nicholas Ruei-Lin Lee, Ming-Min Lo, Hsiang-Hui Chu and Hsiang-Jane Su

Journal of Applied Finance & Banking, 2015, vol. 5, issue 4, 8

Abstract: This paper tests whether price increases in Chinese stock index cause Brent crude oil index. We apply threshold cointegration regression. Our findings in the usual regime suggest that oil price increases do not tend to affect Chinese stock market but oil prices better explain stock returns and stock price increases. However, our findings in the unusual regime suggest that stock price increases can be used as predictors for oil price increases, but oil price increases poorly explain stock price increases. Therefore, our findings could shed lights on threshold cointegratted dynamics of price increases between Brent crude oil and Chinese stock markets.

Date: 2015
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