The impact of global oil price shocks on China’s stock returns: Evidence from the ARJI(-ht)-EGARCH model

This paper investigated the impact of global oil price shocks on China’s stock market, using the ARJI(-ht)-EGARCH model. We separated the volatilities into expected, unexpected and negatively unexpected ones to identify how oil prices influence the stock returns. The results reveal that there are jumps varying in time in China’s stock market, and that China’s stock returns are correlated only with expected volatilities in world oil prices, contrary to previous research. While world oil prices have a positive effect on China’s stock returns, results from this study suggest that this effect is minor.

► We examine the impact of global oil price shocks on China’s stock market.
► There are jumps varying in time in China’s stock market.
► China’s stock returns are correlated only with the expected volatility of world oil price.
► World oil prices have a positive effect on China’s stock returns, and the effect is minor.