Crude Oil Price Shocks and Stock Market Volatility: Evidence From China

As the first international futures variety in China, crude oil futures, its price influence and function play has attracted much attention at home and abroad, from the perspective of market performance, crude oil futures have had a greater impact on the capital market since its launch, and what needs to be further studied is the quantitative degree and complexity of the impact of crude oil futures price fluctuations on stock market fluctuations. The daily data from March 26, 2018 to July 5, 2022 were selected to study the influence of domestic crude oil futures prices on domestic Shanghai and Shenzhen stock index by Granger causality, cointegration test and smooth transition regression model. The study shows that the price and yield of domestic crude oil futures have a one-way guiding effect on the domestic Shanghai and Shenzhen stock indexes and yields, but their guiding effect on the Shenzhen component index is greater than that of the Shanghai Composite Index. Domestic crude oil futures prices and Shanghai and Shenzhen stock indexes have a long-term similar negative cointegration relationship. The positive and negative impact of the domestic crude oil futures price yield on Shanghai and Shenzhen stock index yields is non-linear and asymmetrical, but the mechanism of impact on the two stock markets is different, for the Shanghai stock market, the negative impact of the crude oil futures price yield is greater than the positive shock impact, for the Shenzhen stock market, the positive impact of the crude oil futures price yield is greater than the negative shock impact, and the impact on both stock markets was limited. Therefore, for domestic crude oil futures to become the global crude oil price benchmark, they also need to be continuously improved in terms of national policies, industry supervision, exchange rules and market system construction.