The Influence Of The International Oil Price On Chinese Stock Market

Crude oil acts as one of the most basic energy source and chemical raw materials of modern industrial production.It plays an important role in our economic life and social function.The volatility of crude oil price has always been a hot topic in our social life.With the rapid development of economy in our country,the dependence on imported oil is also rising.In the year of 2013,China has become the world’s largest imported country of crude oil all over the word.The volatility of crude oil price has a certain impact on China’s investment,income and consumption,import and export trade,the price level and economic growth.Moreover,with the increasing of the financial attribute of crude oil,the role of crude oil in the capital market attracted more and more concern.The crude oil is not only an important part of the capital market,but also a barometer of the real economy.After more than 20 years of development and reform,the degree of marketization and openness of China’s stock market is growing deeper and deeper.The effectiveness of the market and the linkage with the international market has also been improved greatly.The changes of international crude oil price may have some impact on China’s stock market.Therefore,this article is to study the national crude oil price’s fluctuations on the impact of stock market and industry index returns,which has great significance and value on many aspects.Such as the national energy security strategy,the construction of Chinese stock market,the asset allocation and risk prevention.This paper studies the impact of international crude oil price volatility on China’s stock market from the perspective of the overall market and industry sector.First of all,First of all,this paper expounds the relevant theories and the transmission mechanism of international crude oil price on the stock market.Then it introduces the fluctuation of international crude oil price and the volatility of China’s stock market,and compares the WTI crude oil futures price to Chinese Shanghai Composite index as to find whether there are some relations between them.Through the theoretical analysis,the author thinks that the fluctuation of international crude oil price will have a certain effect on the stock market and industry index returns.In order to test this effect,a VAR model and GARCH(1,1)model are used to make an empirical analysis.The results show that the fluctuation of international crude oil price has a negative impact on China’s stock market.Specific to the industry sector,the rise of international crude oil price gives good news to the mining industry.And for most of the oil consumption industry,the international crude oil price volatility will have a negative impact on them.But the effect on the nonferrous metals industry is proved to be positive.As other industries are at the end of the industry chain,their response to international crude oil price volatility is not particularly obvious.Finally,based on the above theoretical and empirical analysis results,this paper gives some policy recommendations from the aspects of China’s oil pricing,oil reserves system,the improvement of the stock market and suggestions to investors.