Research On The Impact Of Crude Oil Price Changes On Chinese Industrial Stock Market

As the main raw material for energy resources and industrial production in the world,crude oil plays a vital role in determining the economic development of a country.Since the reform and opening up,China's economy has developed rapidly,which has led to a sharp increase in energy consumption,and the demand for oil has increased year by year.However,China's oil production is relatively small,and a large amount of crude oil imports have caused China's oil dependence to rise.International crude oil prices have soared and fallen sharply in the past decade.The changes in crude oil prices will definitely bring about an inestimable impact on China's macro economy and various industries.Based on this,this paper study the dynamic impact of the crude oil market on China's industrial stock market,which will help the Chinese government formulate energy policies and industrial policies to cope with macroeconomic fluctuations,thus contributing to China's energy strategy security and economy stability and sustainable development.Firstly,this paper reviews the literature on the impact of oil price changes on macroeconomics.The existing research revealed several transmission channels of oil price changes to macro economy.The most direct channel is the supply-side shock.Other channels include income transfer effects and monetary policies,which have an impact on the macro economy as an indirect channel.Then,the paper reviews the impact of crude oil price changes on stock market in three parts: research on the impact of crude oil price changes on overall stock market,the asymmetric impact of crude oil price changes on stock markets,and the impact of crude oil price changes on industrial stock market.The latest research focuses on the time-varying,non-linear,and transmission channels of the relationship between crude oil market and the overall stock market,but there has little literature contain in-depth discussion at the industrial level.Secondly,this paper makes a theoretical analysis of the changes in crude oil prices and the transmission channels to Chinese industrial stock market.With economic globalization and the development of the crude oil futures market,crude oil not only have commodity attributes,but also have many financial attributes.Long-term equilibrium prices are determined by supply and demand,while short-term prices depend on inventory and financial markets.In the long-term,oil price changes affect the stock market through supply-side shock,income transfer effects and monetary policies,etc.The short-term shocks impact the stock market through volatility spillovers.Theoretical analysis show that the impact of crude oil price changes on China's stock market can reflect the nature of the industry chain and cyclical industry,and display supply-side shock effect and asymmetric spillovers.Thirdly,this paper empirically analyzes the long-term impact of crude oil price changes on China's industrial stock indexes,and analyzes the possible supply-side shock effect.Using the EG cointegration model and the HJ cointegration model to analyze the long-term equilibrium relationship between crude oil price changes and China's industrial stock indices prices,the EG method examines whether there is a fixed long-term equilibrium.The HJ method examines the long-term equilibrium relationship under two structural break points.Then,using cointegration models under macroeconomic channel that take into account industries' output,the supply-side shock effect is empirically tested and analyzed.Fourthly,this paper then empirically analyzes the short-term impact of crude oil price changes on China's industrial stock indices,and analyzes the asymmetric spillovers.The DY spillover index is used to empirically analyze the volatility spillover effect of crude oil price changes on China's industrial stock indices.The existing SAM index algorithm is improved,and then the improved SAM index is used to empirically test the possible asymmetric spillovers.Lastly,based on the above analysis,the paper draws the following conclusions and makes policy recommendations accordingly.First,the crude oil price changes generally have a negative impact on industrial indices.Particularly,crude oil prices have a positive impact on the oil extraction industry in the upstream industry and have no significant impact on non-cyclical industries.Second,the mechanism of the impact of oil price changes on industrial stock indices during the financial crisis has changed.During the crisis,there is a positive correlation between them due to the global demand decline.After the crisis,the oil price has a normal impact on industrial stock indices,and the degree of influence shows an upward trend.Third,crude oil price changes have a supply-side shock effect on the upstream resource industry in the stock market,and there is no supply-side shock effect on other industries.Fourth,in the short-term,crude oil prices have time-varying volatility spillover effects on China's industrial stock indices,which have similar influences on different industries and have the greatest impact on cyclical industries.Fifth,in the short-term,there exists asymmetry in the volatility spillover effect,which dominated by the bad volatility,and shows that investors are more sensitive to crude oil price falls.Furthermore,in order to cope with the fluctuation of crude oil prices,we puts forward policy recommendations: gradually establish and improve China's crude oil financial market,improve China's voice in the petroleum industry,compete for international crude oil price pricing power;accelerate the construction and completion of China's crude oil reserve system to resist crude oil price fluctuations;optimize the domestic refined oil pricing mechanism;improve risk monitoring system and continue to promote financial market reform including stock market.