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Swings in Crude Oil Valuations: Analyzing Their Bearing on China’s Stock Market Returns amid the COVID-19 Pandemic Upheaval

Author

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  • Zhuoqi Teng
  • Renhong Wu
  • Yugang He
  • Anibal Coronel

Abstract

The advent of the COVID-19 pandemic has markedly affected energy valuations and financial markets. As such, this article aims to scrutinize the dynamic interplay between stock market returns and crude oil prices, with a particular focus on China, factoring in the second-moment effect of volatility spillover. Employing an EGARCH process to model the leverage impact on returns’ volatility, the analysis utilizes daily data spanning from January 30, 2020, to August 30, 2022, and incorporates causality-in-mean and variance assessments. Empirical findings indicate that the QDII-LOF benchmark, representing oil prices, exerts a substantial influence on stock market returns. Nevertheless, the complete sample reveals no discernible spillover effects attributable to oil price fluctuations. These insights imply that the Chinese government’s actions should carefully weigh the ramifications of spillovers. Concurrently, investors are advised to attentively monitor the crude oil market when making portfolio allocation decisions.

Suggested Citation

  • Zhuoqi Teng & Renhong Wu & Yugang He & Anibal Coronel, 2023. "Swings in Crude Oil Valuations: Analyzing Their Bearing on China’s Stock Market Returns amid the COVID-19 Pandemic Upheaval," Discrete Dynamics in Nature and Society, Hindawi, vol. 2023, pages 1-10, June.
    • Handle: RePEc:hin:jnddns:6695727
    DOI: 10.1155/2023/6695727
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