An empirical research of crude oil price changes and stock market in China: evidence from the structural breaks and quantile regression

Abstract

This article investigates the relationship between real crude oil price changes and the Chinese real stock market at the industry level. Our study uses monthly data over the period 1994:03 to 2013:12. Based on input–output (IO) tables, this article will explore more details for the driving factors of sensitivity to oil price changes. We divide these driving factors into cost- and demand-side dependence. Empirical results reveal that sensitivity varies across different industries and periods based on structural breaks and asymmetric effects of oil price changes. Furthermore, some industries seemingly not directly affected by oil are sensitive to the real oil price changes. Finally, using a penalized quantile regression for panel data, we find that these two factors significantly affect lower, but not upper, quantile of sensitivity.

Keywords:

• crude oil
• industry stock market
• input–output tables
• structural breaks
• penalized quantile regression

JEL Classification:

• R15
• Q43

Acknowledgements

We thank the editor and the anonymous referee for their valuable comments and suggestions on an earlier version of this article.

Notes

¹ We would like to thank the anonymous reviewer for pointing out this issue. The housing prices should be also taken into account, since stock market returns may be affected by the estate market (e.g. Liu and Su, 2010; Lin and Fuerst, 2014; Li et al., 2015). However, the monthly data are unavailable due to the long time span of this study.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [grant number 71031004], [grant number 71171075], [grant number 71221001].