Analysis Of The Time-varying Dependance Structure Between The International Crude Oil Market And The Chinese Stock Market

Crude oil is one of the most important strategic energy sources in the world today,and it is of great significance to the development of the national economy and financial markets.History shows that every major fluctuation in international crude oil prices will have a huge impact on the world economy.At present,China's crude oil production can no longer meet the needs of the petrochemical industry.China needs to import a large amount of crude oil from abroad every year to meet its own needs.In 1993,for the first time,China became a net importer of crude oil,with an import volume of 8.95 Mt.Since then,crude oil imports have increased year by year.In 2015,China imported about 334 million tons of crude oil from all over the world,and its external dependence exceeded 60% for the first time.In 2016 and 2017,China's crude oil imports reached 381 million tons and 420 million tons,respectively.In 2018,China's crude oil imports reached 462 million tons,a record high.In view of the strong dependence of the Chinese economy on the international crude oil market,fluctuations in international crude oil prices will inevitably have a greater impact on China's economy and are reflected first in the stock market.Therefore,it is necessary to pay attention to the relationship between the international crude oil futures market and China's stock market Relevance.But the relationship between these two markets is likely to be affected by uncertainty in economic policy.With the increasing complexity of the global economy,various countries and China are facing increasing uncertainties in economic policies.In particular,China is in the primary stage of socialist development and is facing a critical period of economic transformation.China's financial markets Compared with developed countries,China 's development is still not perfect,so China also faces relatively strong uncertainty in economic policies.A large number of studies have shown that the uncertainty of economic policies will have a significant impact on economic operations and financial markets.When we study the correlation between the international crude oil market and China's stock market,it is necessary to consider whether the uncertainty of economic policy will affect the two markets,and then affect the correlation between the two markets.To this end,this article selected the CSI 300 Index,the Shanghai Composite Index and the Shenzhen Component Index from January 1,2006 to September 30,2019 to represent the Chinese stock market,as well as West Texas Intermediate crude oil futures(WTI)and Brent Special crude oil futures(Brent)market to represent the international crude oil futures market.China's economic policy uncertainty index uses the monthly China Economic Policy Uncertainty Index compiled by Hong Kong scholars Huang&Lu.The dynamic correlation between the Chinese stock market and the international oil market is studied from the following aspects.First,this paper uses the non-linear Copula tool,DCC-Copula model,to model the relevant structure of the international crude oil market and the Chinese stock market,and initially examines the time-varying correlation characteristics between WTI crude oil futures and Brent crude oil futures and the Chinese stock market.Next,we introduce the idea of mixing data model and non-linear Copula tools.Based on the DCC-MIDAS model Colacito et al.(2011),we design a CopulaMIDAS model to further examine economic policy The possible impact of uncertainty on the relevant structure of the international oil market and the Chinese stock market.The empirical results of this article are as follows:First,the empirical results based on the DCC-Copula model show that both the WTI crude oil futures market and the Brent crude oil futures market have a strong correlation with the Chinese stock market.Their correlation structure not only reflects obvious nonlinear characteristics but also shows obvious time-varying characteristics.Comparing the time-varying trend between the international oil market and the Chinese stock market with the uncertainty of China's economic policy,we can see that there may be a negative correlation.Second,the results based on the DCC-MIDAS model show that the correlation between the international crude oil market and the CSI 300 is negatively affected by the uncertainty of economic policies;while the results of the Copula-MIDAS model consistently show that no matter which index is used To characterize the Chinese stock market,its correlation with the two crude oil futures markets will weaken as the uncertainty of Chinese economic policy rises.This may be because the impact of Chinese economic policy uncertainty on the international crude oil market and the Chinese stock market is Degrees and directions are different.Based on the above results,we recommend: First,in view of the uncertainty of economic policies not only affecting the international oil market and the Chinese stock market,but also the correlation between the two,it is necessary to minimize the uncertainty of economic policy presentation.To prevent financial risks.Second,investors should pay attention to the time-varying nature of their complex related structures and the impact of economic policy uncertainty on such related structures when allocating assets between the international crude oil futures market and the Chinese stock market.Third,we find that the results obtained using the CopulaMIDAS model and the DCC-MIDAS model are slightly different,so in the future when modeling similar financial market related structures or using macroeconomic variables to model the correlation structure between financial markets Not only can you consider using the DCC-MIDAS model,you can also try using the CopulaMIDAS model.