Dynamic Dependence Between International Crude Oil Market And Chinese Stock Market

Crude oil is one of the most important commodities in the global economy,and plays a vital role in social and economic operations.In addition,time-varying risk aversion affects financial markets through investor sentiment and equity premium.When the time change risk aversion increases(decreases),it may lead to the decline(rise)of crude oil price,and affect the decline or rise of crude oil import and export industry in the stock market.The time change risk aversion affects the dynamic dependence between the crude oil market and the stock market.Instability in the current international environment has become increasingly complex,obviously increase the uncertainty,especially the outbreak of a pandemic the changing current under the background of accelerated change,investors short-term risk aversion increases,the time-varying risk aversion as mood proxy variables to depict on the international market of crude oil and the influence of the dynamic dependence between China’s stock market has important practical significance and theoretical significance.In order to capture the impact of time-varying risk aversion on the dynamic dependence between the international crude oil market and the Chinese stock market,this paper expands the traditional Copula model,constructs a Copula MIDAS model that introduces time-varying risk aversion indicators,and selects Brent crude oil price,Shanghai Shenzhen 300 index and the timely variable risk aversion index for research.In particular,in order to consider the heterogeneity of the impact of time-varying risk aversion on the dynamic dependence between the international crude oil market and China’s stock market,this paper starts from the perspective of the overall market,industry sectors and special periods,The Shenyin Wanguo industry index is selected and the series after the probability integral transformation are connected by using the mixing Copula function to describe the dependence structure between the Chinese stock market and the crude oil price and the impact of risk aversion on their dependence.Finally,different marginal distribution models,China stock index and industry sub index are selected for robustness test.Empirical results show that time-varying risk aversion does affect the dynamic dependence between international crude oil market and Chinese stock market.Moreover,the time-varying risk aversion has a positive effect on its dynamic dependence.The increase and decrease of the instant-varying risk aversion index both enhance the dynamic dependence between crude oil and stock market.Secondly,the time-varying risk aversion has different effects on the dynamic dependence of various industries in the international crude oil market and the Chinese stock market.In addition,the impact of time-varying risk aversion on the dynamic dependence between international crude oil market and Chinese stock market is also significantly different in different periods.Finally,based on the empirical research conclusions,the relevant policy recommendations are proposed from the three levels of policy makers,market investors and financial regulators.