Research On Co-movement Of International Crude Oil Price And Chinese Stock Market In A Multivariate Framework

Crude oil is an indispensable strategic resource for all economies in the world.With the issuance of the first crude oil futures contract,the international crude oil market and the financial market are rapidly and closely integrated,the pricing rules in the international crude oil market are more complex and the price fluctuations are more frequent,the sensitivity of the stock market to the volatility of international oil prices has also risen.China as a big crude oil demand country,the fluctuation of international crude oil price not only directly impacts Chinese stock market on the micro-level,but also affects the stock market trend indirectly through macro-economy.At present,the Chinese stock market still belongs to the emerging market,which is at the stage of development.Compared with the mature stock market in developed countries,the ability to resist external shocks is poor.Therefore,an in-depth study of the co-movement between international crude oil prices and Chinses stock market,on the one hand,can deepen the understanding of the impact effect of international crude oil prices on the stock market.On the other hand,it is very important for securities market supervision department to prevent financial risk and investors to avoid investment risk.This paper firstly reviews the relevant literatures at home and abroad,and expounds the formation and development of international crude oil market,the international crude oil pricing system and the shock effect of oil price fluctuation.Based on this theory,this paper studies the co-movement between international crude oil price and Chinese stock market in a multivariate framework.Based on the monthly data from January 2005 to December 2017,this paper introduces three macroeconomic indicators: exchange rate of RMB against U.S.dollar,industry production and total foreign trade of China to establish a multivariate framework and explores long-term equilibrium relationship between international crude oil price and China stock market in this multivariate framework by both linear cointegration test and nonlinear threshold cointegration tests.In order to ensure the accurate identification of the cointegration relationship,the results were tested for robustness.The results show that: First,there is a longterm equilibrium relationship between international crude oil price and China stock market within the time span.Second,the cointegration relationship between the international crude oil price and the Chinese stock market is non-linear,and there were two endogenous structural changes in March 2008 and December 2012.The former is near the nominal burst of subprime mortgage crisis in September 2008 marked by the collapse of Lehman Brothers Holdings Inc,while the latter was linked to the 18 th National Congress of the Communist Party of China in November 2012.It is worth noting that after the global financial crisis,the correlation between the international crude oil price and the Chinses stock market increased significantly.Third,the existence of cointegration relationship between variables in the multivariate framework also shows that the exchange rate of RMB against U.S.dollar,industry production and total foreign trade of China introduced in this paper play an important role in explaining the impact of international crude oil price fluctuation on Chinese stock market.On this basis,the TodaYamamoto causality test is used to investigate the long-term causality among variables in the multivariate framework.The results show that: First,the direct impact of international oil prices on China's stock market is persistent.Second,the impact of international oil price on the scale of China's foreign trade continues to exist.Third,the international oil price is an exogenous variable and is not affected by any variables selected in this paper.Fourth,macroeconomic factors are important channels for transmitting the influence of international crude oil price on China stock market,China stock market is not only directly affected by international crude oil price fluctuations,but also indirectly affected by international crude oil prices through related macroeconomic factors.Based on the above conclusions,this paper puts forward some suggestions from the perspectives of policy makers,investors and the state in order to reduce the impact of crude oil price fluctuation on China's macro-economy and stock market,and to maintain the stability of the financial market.