The Impact Of The Volatility Of The Oil Price On The China's Stock Market Returns

Oil,irreplaceable and comparable to any other resource is mostly related to the stability of all countries and the lifeblood of the economy.China is the largest developing country with the significant improvement of the degree of industrialization and the level of people's life,the role of oil in China's economic development is more and more important.However,the lack of domestic oil supply and domestic oil industry downturn increase China's demand for international oil increased in recent years.It's predicted that China's oil gap will reach 250 million tons and the rate of external dependency will be as high as 65%.In this background,our country's economy will be undoubtedly influenced by the international oil market and the fluctuations of the international oil price.As an important part of the financial market and the 'barometer' of a country's economic development,the stock market largely reflects the situation of a nation's overall economic development,thus it has a close connection with the international oil market.However,it's not enough to study the influence of international oil price fluctuations on China's overall stock market,because different stock index of different industries is not the same.Therefore,based on the industry point of view,this paper introduces the international oil price fluctuations on the stock index returns under the China's Wind industry classification.This paper first introduced the demand of oil in history and the oil price trending,then introduced the current development of oil in China and the relationship between the Chinese stock market and the international oil market,thus put forward the significance and innovation of this paper.According to the standard of time,this paper then summarized the research results of the domestic and foreign scholars.On the basis of this,this paper classified the 10 industries selected and studied the influence of international oil price fluctuations on the oil production industry,oil consumption industry,oil alternative industry and oil-unrelated industry respectively qualitatively.In the empirical analysis,this paper selected the West Texas light crude oil futures price index changing rate,China's Wind A stock index returns and 10 industries' stock index returns under classification of Wind as the research object,with the construction of GED-EGARCH(1,1)-M model,to explore the impact of the international oil price fluctuations on the 10 industries,stock index returns during the time of January 2001 to February 2017in china.The results showed that the effect of the international oil price fluctuations has a negative impact on the telecom service industry,public utilities industry,industry,financial industry and the optional consumer industry,showing that the rising price change rate can reduce such industries' stock returns.Similarity,the change rate has a positive impact on the energy industry and the daily consumption industry,showing the increase oil price changes will increase the stock return of these two industries.However,the influence coefficient of the material industry,information technology industry and technology industry is not significant.Finally,based on the above qualitative analysis and empirical study,this paper carried out the following considerations:first,when invest in the listed Companies on some sectors of the stock in China,investors should regard the international oil price changes as a reference factor.For example,because the rising in international oil prices will bring negative influence to the industry stock returns,when the international oil price continues to rise in a period of time and the macroeconomic environment has not changed under the condition,the investors can short the industry and strive to obtain certain benefits in the long term.Second,China's Listed Companies,when face the situation of the fluctuations of the international oil price,should learn to adjust the company's strategy to strengthen the research to increase the rational consciousness of the international oil market;Third,in order to strengthen ties with the international market,accelerate the pace of international stock markets,optimize the allocation of global resources,China must continue to promote the stock market reform,make flexible adjustment of relevant policies and have the conscience that the implementation of the policy will get the benefits and adverse effects;Fourth,whether from the present or future prediction,Chinese foreign oil dependency is always high.Higher and higher dependence on oil will result in a passive position in the international oil market.Therefore,the residents should strengthen their energy saving awareness,companies in the production and sales,should strive to improve energy efficiency,develop the new energy sources as the alternatives to fossil fuels,and the country should increase supervision in the tax policy,credit related to control and investment project approval.