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The contagion effect of international crude oil price fluctuations on Chinese stock market investor sentiment

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  • Ding, Zhihua
  • Liu, Zhenhua
  • Zhang, Yuejun
  • Long, Ruyin

Abstract

Given the close contact between international financial markets,the contagion effect across markets is becoming increasingly obvious. In this paper, which uses principal component analysis to build a Chinese stock market investor sentiment index and further applies a structural vector autoregression (SVAR) model, we analyze the contagion effect of international crude oil price fluctuations on Chinese stock market investor sentiment. The results show that international crude oil price fluctuations significantly Granger cause Chinese stock market investor sentiment; in the long term, if the international crude oil price fluctuates by 1%, stock market sentiment will negatively fluctuate 3.9400%. From the perspective of short-term efficacy, if the international crude oil price fluctuates by 1%, stock market investor sentiment in the same period will negatively fluctuate 1.0223%. International crude oil prices made a greater early contribution to investor sentiment and showed a rapid growth trend, with a contribution of 2.8076% in the first period and 8.1955% in the second. The growth rate then slows and eventually stabilizes at the 25% level; the average contagion delay for international crude oil price fluctuation to affect investor sentiment is 8months.

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  • Ding, Zhihua & Liu, Zhenhua & Zhang, Yuejun & Long, Ruyin, 2017. "The contagion effect of international crude oil price fluctuations on Chinese stock market investor sentiment," Applied Energy, Elsevier, vol. 187(C), pages 27-36.
    • Handle: RePEc:eee:appene:v:187:y:2017:i:c:p:27-36
    DOI: 10.1016/j.apenergy.2016.11.037
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