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The extreme-value dependence between the crude oil price and Chinese stock markets

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  • Chen, Qian
  • Lv, Xin

Abstract

This paper examines the asymptotic dependence between the Chinese stock market and the world crude oil market based on the Extreme Value Theory (EVT) and finds a positive extremal dependence. We explain this positive dependence in terms of economic cycles due to the co-movement between the Chinese stock market, the world oil market and the global economic cycle. EVT satisfactorily captures the Chinese special oil price adjustment mechanism. We also examine the contagion effect and find that the dependence level tends to increase dramatically during the crisis period but that the simultaneous booms between these two markets decrease considerably after the crisis.

Suggested Citation

  • Chen, Qian & Lv, Xin, 2015. "The extreme-value dependence between the crude oil price and Chinese stock markets," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 121-132.
    • Handle: RePEc:eee:reveco:v:39:y:2015:i:c:p:121-132
    DOI: 10.1016/j.iref.2015.03.007
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    More about this item

    Keywords

    Crude oil price; Stock market; Extreme Value Theory; Economic cycle;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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