Impact And Analysis Of International Oil Price Fluctuation On China Stock Market

As important energy resources and raw materials, the influence of oil pricefluctuation on the economy is one of the focus issues in the key areas. With theintegration of the world economy progress, the world economies have closerrelationship with each other, and the linkage between financial market and crude oilmarket also getting closer year by year. The high-energy-consumption industries hasgradually transferred from developed countries to developing countries with theconstantly adjustments of world industrial structure pattern. Therefore, the internationaloil price fluctuations have greater impact on the economy activities of high energyconsumption and high crude oil imported dependence developing countries, whichcannot be ignored. China has become the biggest energy consumption developingcountry in the world, so it has important theoretical and practical significance to valuethe international the influence of the international oil price fluctuations on Chinaeconomic activities. To explore the impact of the international oil price on Chinaeconomic activities, this paper takes the impact of the international oil price on Chinastock market as research object. After reviewing the research on the relationshipbetween international oil price and economic activities in the world, this papercontinued to the theory background foundation and summarized the influence factors ofinternational oil price from the aspects of oil price formation mechanism. Then forfollow-up study in this paper provides a certain theoretical foil, this paper analyzes thefour transmission paths from the international oil price to China stock market in detail,which includes monetary transmission and trade transmission. Based on this, the paperstudies the influence of international oil price fluctuations on China stock market,mainly from the following aspects.Firstly, empirical research, according with Chinese economy situation, this paperdeeply investigates and analyzes the short-term, long-term and dynamic relationshipbetween international oil price and China stock market with cointegration test, errorcorrection model and dynamic measurements. The results confirm the existence ofshort-term and long-term relationship between international oil price volatility andChina stock market. The impact of international oil price mainly concentrates in short-term. The relationship between international oil price and China stock market changeswith the changing of economic development and time passing. The correlation betweenChina stock market and oil price is not simple positive or negative, which appearspositive and negative crisscross, and finally the correlation even appears positive inrecent years. Rolling windows VAR method is used to describe accurately and furtherexamine the dynamic varying relationship between China stock market and international oil price. With the continuous increase amount of oil import, the inhibitioneffect of oil price on China economy can be reflected by time passing. Oil prices mainlyhave impact on eight sector indices which include hydropower, transportation, utilities,mining, manufacture, industry, metal and paper-making sector. The long-runequilibrium has reversal adjust action to hydrawater, transportation, mining andmanufacturing sector.Then, to take the internal changes of international oil market into the relationshipbetween China stock market and international oil price, structure VAR model is used todiscompose international oil price into three part effect factors which include oil supplyshock, economic demand shock and oil-specific demand shock. Empirical test resultsshow that the three kinds of oil price fluctuations have complex impacts on China stockmarket. Empirical results show that oil price rises driven by oil supply and oil-specificdemand shocks have adverse impacts on China stock market, while the adverse impactof oil price rise driven by economic demand shocks on China stock market is partly ortotally offset by the propellant impact of good economic situation on China stockmarket. The study conclusions provide some supports for the research of dynamicchanges relationship between international oil price and China stock market.Finally, the paper takes the internal changes of international oil market into theasymmetrical effect of international oil price on China stock market. In the new studyframework, the paper deeply investigates and comparatively analyzes the asymmetricaleffect of the structural oil price shocks on China stock market. Empirical results showthat various shocks have significantly different asymmetrical effects on China stockmarket. Asymmetrical effect model results show that oil price fluctuations driven bydifferent factors have different asymmetrical effects on China stock market and relatedsector stock returns. And the empirical results show that not all the oil price fluctuationshave distinctly asymmetrical effects on China stock market and related sector stockreturns. We’d better distinguish the driven factors and then make decision such aspolicy-making and investment portfolio decision.This paper can enrich the research about the impact of oil price on developingcountry’s economy and has great theoretical significance. While at the same time, theresearch framework can give policy-maker and investors some advices in makingmacroeconomic policies and investment portfolio related to oil price at differentenvironment in the aspect of structural oil price fluctuations decomposition.