Open AccessVolatility Spillover Effect of International Crude Oil Futures and China-Russia Stock Market: A Multivariate BEKK-GARCH Model Based on Wavelet Multiresolution Analysis
Author(s) -
Maoguo Wu,
Daimin Lu
Publication year - 2019
Publication title -
asian journal of finance and accounting
Language(s) - English
Resource type - Journals
ISSN - 1946-052X
DOI - 10.5296/ajfa.v11i1.14348
Subject(s) - futures contract , economics , oil storage trade , stock market , stock market index , financial economics , crack spread , volatility (finance) , brent crude , crude oil , monetary economics , oil price , paleontology , horse , petroleum engineering , biology , engineering
The increasingly prominent strategic position of crude oil determines its high impact on macro-economy. The value of crude oil is reflected in the price of crude oil futures. Stock market is the barometer of macro economy. To what extent does international crude oil futures price affect stock market? China and Russia are the biggest importer and exporter of crude oil, respectively. Crude oil is of strategic value to both countries. This study empirically investigates the volatility spillover effect of international crude oil futures and China-Russia stock market from April 24th, 2015 to April 20th, 2018, based on the data of international crude oil futures prices, China-Russia stock market composite index, and industry stock index. The empirical results show that there is a short-term relationship between China-Russia stock market composite index and international crude oil futures price. The international crude oil futures price has a greater explanatory power to Russian RTS index, but a smaller explanatory power to Shanghai composite index. All industry stock indices are cointegrated with international crude oil futures prices. Except for China industry and Russia energy, the adjustment coefficient of international crude oil futures price on stock index volatility of other industries is insignificant. This study mainly studies the relationship between international crude oil futures price and the comprehensive stock index and industry stock index of China and Russia, and compares the impact of international crude oil futures price on the stock market of the largest importer and the largest exporter of crude oil to explore the linkage between crude oil futures price and stock market, and puts forward policy implications based on the empirical results.