The Impact Of International Oil Price Uncertainty On Chinese Stock Market

The fluctuation of international crude oil price has become more and more unstable these years.Factors that can change international oil price are complicated.Not only economic factors like supply and demand but also uneconomic factors such as global political situations and geopolitics may have impact on oil price,which make it very unpredictable.Oil acts as the most important input factor in an economy.Therefore,the change of its price can impose on stock market through important macroeconomic variables such as aggregate demand and supply and unemployment rate.In addition,classical theories believe that oil price uncertainty can cause corporations to postpone their investment or increase their production cost when holding on.This may have negative impact on their future profit and cash flows,therefore their stock price.The conclusions above have been proved by those researches targeting at developed capital markets.However,the conditions of China itself may be more special.Although have been through several times of reform,the pricing mechanism of oil price in China,one of the most important oil-consuming and importing countries around the world,is still on its way of marketization.Besides,Chinese stock market is sensitive to exogenous policies and regulations.This may cause the influence of international oil price uncertainty on Chinese stock market become more complex,meanwhile the research on this problem become more valuable.Studying the impact of oil price uncertainty on Chinese stock market is the main purpose of this paper.To achieve that,this paper focuses on the theoretical analysis and the empirical research in the view of both whole market and sector index.In the first part of this paper,by using weekly data from January 7th,2000 to March 3rd,2017,it compares the impact of international oil price uncertainty on A-share index before and after the reform of refined oil pricing based on an SVAR-GARCH-M model with residual following t-distribution.This paper finds that oil price uncertainty has greater impact on market index after the refonn than before.And it makes the return rate of market index response in an asymmetric pattern when facing positive and negative oil price shocks.Then,in its second part,this paper examines the impact of oil price uncertainty on 11 A-level industries in Chinese stock market.Based on a time-varying framework,the VAR-DCC-GARCH-M model with residuals following student t-distribution is used to explore the influence of oil price uncertainty on sector indices and study the time-varying status and persistence of the synchronic fluctuation between the two when facing three different kinds of oil price shocks.The results show that the impacts of oil price uncertainty vary between different industries,but become largest in the period of demand shock.The dynamic correlativity is significant between oil price change and five sector indices.And those five series of correlations present a common feature when the stock market becomes extremely volatile.Based on the conclusions above,this article attempts to give recommendations in the view of state energy strategies,investment decisions and future research directions.