Impacts Of Oil Price Fluctuations On The Stock Market Across Multiple Time Horizons

The crude oil,as the fundamental material and crucial primary energy,is one of the driving forces of the economy.The price fluctuations of oil price could exert significant influence on the stock market.Therefore,we explore the impact of the crude oil price fluctuations on the stock market from the multiscale perspective with consideration of the driving forces of oil price fluctuations.The main results and contribution are as following,(1)Introduce the oil price fluctuation theory and the conception of multiple solution analysis into the dynamic analysis between the oil price fluctuation and stock market.Set up the model to identify the oil price fluctuations based on the demand and supply factors.In the original time domain,the supply and demand factors remain the major factors to the oil price fluctuations.Then,identifying the demand and supply driven oil price fluctuations through the original oil price across multiple time scales,which could be the fundament of the analysis between the oil price and stock market and offer novel perspective into the oil-stock nexus study.(2)Set up the dynamical impact model across multiple time scales to analyze the impacts of supply and demand driven oil price fluctuations on the global composite stock index and sectoral indices.Concerning the global composite stock index,the impact direction of the supply and demand driven oil price fluctuations are random in the short time scales,and in the longer time scales the impact direction of the supply and demand driven oil price fluctuations is initially positive.This is because the oil price increase could redistribute the fortune among countries;the oil exporting countries invest the money gained from the oil trade into the international stock market,which boom the global stock market.Come to the sectoral stock indices,the impact direction to the sectoral stock indices of the supply driven oil price fluctuations is initially negative due to the oil price fluctuations caused by the oil supply increase the cost of the companies and depress the stock market,while the impact directions to the sectoral stock indices of the demand driven oil price fluctuations are partly negative and partly positive.The positive impact is because the negative influence of the oil price fluctuations is traded off by the increase of the stock market driven by the demand factors,whereas the negative impact is due to the negative influence of the oil price fluctuations is greater than the increase of the stock market driven by the demand factor.(3)Incorporate the cross-correlation function and network analysis to explore the lead-lag relationships among the impact of oil price fluctuations on sectoral stock indices.The network models for each time scale are various due to the difference among number of the coherence series between oil price and sectoral stock involved into the lead-lad relations and the length of the lead-lag time.The transports,utilities and consumer discretionary indices have higher possibility to be the sectors leading other sectors to respond to the oil price fluctuations,whereas materials and telecommunications sectoral indices tend to lag other sectors to be influenced by the oil price fluctuations.In addition,according to the transmission features,we infer that the stock market fluctuation in the short terms are decided by the fluctuations of the sectoral indices triggered by the oil price at the same time,whereas the fluctuations of the stock market in the long term is the impact of the oil price fluctuations originally from different time points due to the significant lead-lag time differences.