Spillover Effects Of International Oil Price Volatility On China's Financial Market

Crude oil is the basic energy and raw material,and has the triple attributes of commodity,finance and politics.With the construction of petrodollar system and the rapid development of crude oil derivatives,the integration of crude oil market and financial market is deepening.China is the world's second largest economy and the world's largest crude oil importer.In recent years,China's dependence on foreign crude oil continues to rise,and it has no pricing power in the crude oil market.The fluctuation of international oil prices has a strong impact on China's economic development and financial security.Since 2008,under the influence of internal and external events such as the Global Financial Crisis,RMB Exchange Rate Reform and the trade war,the linkage between crude oil market and China's financial market has been increasingly strengthened.Under the impact of Covid-19 of early 2020,the uncertainty in the oil market and financial market has been increased significantly.With the four circuit breakers in the US stock market and the emergence of negative oil prices in crude oil futures,the oil price changes made more complex financial market returns and risk spillovers.In view of this,under the background of increasingly close relationship between crude oil market and financial market,it is of great theoretical value and practical significance to explore the impact of oil price changes on China's financial market and time-varying spillover differences.In addition to the change of supply and demand,financial risk events,geopolitical conflicts and economic policy adjustments will induce sharp changes in oil prices,which will lead to significant fluctuations in oil prices in different time periods or in different volatility periods.Therefore,the spillover effects of oil price changes on financial markets will show to a certain extent multi-time scale.In view of this,this paper starts from the perspective of muti-time scale,and takes stock market,exchange market and derivatives market as examples,and uses wavelet analysis,spillover index model and copula model to measure and analyze the impact of oil price changes on different types of financial markets in China,and time-varying spillover differences.On this basis,the introduction of economic policy uncertainty,the comprehensive consideration of various financial markets,the establishment of "Crude oil marketChina financial market-Economic policy uncertainty" return system and volatility system,further explore the overall yield spillover and volatility spillover of oil price changes on China's financial market,and then more scientifically locate the impact of crude oil market on China's financial market and multi-time scale spillover differences.This paper consists of seven parts.The first part is the introduction.It mainly introduces the research background,research significance,literature review,research methods,research framework,main content,research innovation and research deficiency.The second part is the theoretical basis and conduction mechanism.On the basis of the definition of the concept,this paper introduces the triple attributes of crude oil,information transmission and spillover effects,and combs the transmission mechanism of the impact of oil price changes on the stock market,exchange market and derivatives market.The third part to the sixth part is the empirical research section.The third part is based on wavelet analysis and time-varying t-Copula model to explore the spillover effect of oil price changes on China's stock market.The fourth part analyzes the spillover effect of oil price changes on China's exchange market based on wavelet analysis and Diebold & Yilmaz spillover index model.The fifth part is based on wavelet analysis,Diebold & Yilmaz and Barnik & Krehlik spillover index model discusses the spillover effect of oil price changes on China's derivatives market.The sixth part studies the comprehensive spillover effect of oil price changes on China's financial market based on BEKK-GARCH model and time-frequency spillover index model.The last part is the conclusion and suggestion.The conclusions of this paper are summarized as follows:Firstly,under different time scales,the overall spillover of oil price changes on China's stock market is different;under different volatility periods,the impact of oil price changes on stock indexes of different industries has persistence and tail correlation.First of all,oil price volatility on the stock market composite index.The spillover of oil price changes on China's stock market is more concentrated in the medium and highscale.The short-term shocks aggravate the volatility of the stock market,and the medium and long-term shocks affect the fluctuation trend.The oil price changes in the medium-term fluctuations are mostly ahead of the changes in the stock market,while in the long-term fluctuations,the latter is mostly ahead of the former.Second,oil price volatility on the stock index of various industries.In a single time-dimension,the impact of oil price changes on the stock indexex of various industries has persistence and tail correlation.In different volatility periods,the persistence and tail correlation of spillovers are low in the short-term,and gradually increase in the medium and longterm;in the short-term fluctuations,China as the demand side has a stronger impact on the spillovers,and the medium and long-term fluctuations are mainly related to the commodity and financial attributes of crude oil.Secondly,under different fluctuation periods,the spillover of oil price changes to RMB exchange rate has persistence and difference,and the spillover differences of oil price on exchange rates of different countries are obvious;international oil price is net exporter in the medium and long term,RMB exchange rate is net receiver in short term.First of all,oil price voaltity on the RMB exchange rate.The significant energy changes of the two are concentrated in the medium and high-scale.The lead-lag relationship between oil price and RMB exchange rate is dynamic,and the change of oil price tends to lead the fluctuation of RMB exchange rate in the medium-scale,and the latter leads the former in the high-scale.Second,the changes of oil price affect the exchange rate of different countries.In a single time-dimension,the total spillover in the system is34.61%.International oil price,RMB exchange rate,pound exchange rate and Japanese yen exchange rate are net recipients,and the rest are net exporters.Under multi-time scale,the total spillovers in the medium and long term are higher than that in the short term,oil price is the net exporter in the medium and long term,and the RMB exchange rate is the net receiver in the short term.Thirdly,under different time scales,oil price changes have a leading role in SC crude oil futures,and the time-frequency spillovers of different commodity futures are significantly different,and the impact of risk events affects the trend of spillover effect.First of all,changes in oil prices affect SC crude oil futures.The change of oil price scale 2 is easy to induce the short-term fluctuation of SC crude oil futures,and the longterm fluctuation of the latter is mainly related to the change under the former scale 6.In 2018,the international crude oil futures tend to lead crude oil futures,and after 2019,the latter will lead the former.Second,the impact of oil price changes on China's commodity futures.For the static spillover index,the total spillover in the time-domain is 31.99%.International crude oil futures and energy chemical futures are net exporters,and the rest are net recipients.At the frequency-domain level,the total spillover in each frequency-domain decrease gradually without considering other frequency-domain effects;when considering the interaction between frequency domains,the total spillover is greater than 30% and increases gradually.For the dynamic spillover effect,the fluctuation range of the total spillover gradually decreases,which is similar to that in the time-domain in the short-term,and similar in the medium and long term.Fourthly,the comprehensive spillover of oil price changes on China's financial market has stage difference,time-frequency spillover has persistence and agglomeration,and the increase of economic policy uncertainty will aggravate the oil price's return and volatility spillover on China's financial market.First of all,spillover effect in different periods.In the period of financial crisis and low oil price,for the return spillover,the oil price change has significant spillover on the stock market,before and after the crisis on the foreign exchange market,during and after the crisis on the derivatives market,and after the crisis on the economic policy uncertainty spillover.For volatility spillover,except before the crisis,oil price changes have spillover on the stock market;oil price and foreign exchange market have two-way spillover before and after the crisis,and one-way spillover during the crisis;one-way spillover of oil price and derivatives market during and after the crisis;one-way spillover of oil price on economic policy uncertainty.Second,time-frequency spillover effect.For the static spillover,the total volatility spillover is greater than the total retuen spillover in timedomain.Oil price is the net exporter of return and the net receiver of volatility.In the frequency-domain,the total volatility spillover decreases gradually without considering other frequency-domain effects,and the volatility spillover first decreases and then rises;considering the interaction between frequency domains,the volatility spillover lasts longer.The fluctuation trend of dynamic spillover is similar to that of static spillover.The contributions of this paper are mainly reflected in the following four aspects:Firstly,this paper analyzes the multi-time scale spillover effects of oil price volatilty on China's financial market as a whole,and different types of financial markets in different volatility periods and frequency domains,and summarizes the evolution characteristics of spillover differences.Secondly,this paper analyzes the relationship between oil price changes and a comprehensive index of a financial market,and explores the impact of oil price changes on the internal segmentation of financial markets,and discusses the impact of oil price changes on different types of financial markets in China from the perspective of market deepening differences.Thirdly,this paper brings stock market,exchange market and derivatives market into a unified analysis framework,and introduces economic policy uncertainty to construct the return system and volatility system of "Crude oil market-China financial marke-Economic policy uncertainty",so as to measure the impact of oil price changes on China's financial market the comprehensive influence of the field is different in time,and the evolution characteristics of time-frequency domain are summarized.Fourthly,this paper comprehensively considers the mean spillover effect and volatility spillover effect,and uses BEKK-GARCH model and time-frequency spillover index model,to measure and analyze the mean spillovers and volatility spillovers of oil price changes on China's financial market as a whole from the systemic level,and combs and integrates the spillover differences under different volatility periods and the volatility spillovers.In short,this paper finds that oil price changes will have spillover effects on China's financial market as a whole and all kinds of financial markets,and the spillover effects have multi-time scale differences.In view of this,in order to better deal with the crude oil market shocks and enhance the ability of risk prevention and control,we can start from the following four aspects: firstly,comprehensively consider the impact of oil price shocks,optimize financial market supervision;secondly,tap the development potential of financial market to promote the organic integration of energy market and financial market;thirdly,strengthen international energy cooperation and financial coordination to enhance China's voice in international crude oil pricing;finally,enhance the ability of financial institutions to identify and prevent oil price risks,so as to ensure the smooth operation of the financial market.