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Heterogeneous Responses to China and Oil Shocks: the G7 Stock Markets

Author

Listed:
  • Jamal Bouoiyour

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

  • Refk Selmi

    (IRMAPE - Institut de Recherche en Management et Pays Emergents - ESC PAU - Ecole Supérieure de Commerce, Pau Business School, CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

Abstract

Given its size and integration with the global economy, Chinese economic downturn could have momentous spillovers to the rest of the world and result in a decline in oil prices. This article investigates whether the Chinese economic slowdown and the oil prices affect the G7 stock market. We use a Quantile-on-Quantile regression approach to capture the correlation structure between the G7 stock returns and oil price returns under different G7 market conditions with considering nuances of oil price movements and Chinese slowdown. Data are employed over the period of January 1999 ~ December 2015. Our results show that the responses of G7 stock returns to China and oil shocks are likely to be asymmetric, nonlinear and country-specific. The stock market returns of Germany, Italy and Canada appear the most vulnerable to these shocks. Our results suggest that international investors consider the states of stock market returns and oil price alongside with the interaction effect between China's economic slowdown and oil market.

Suggested Citation

  • Jamal Bouoiyour & Refk Selmi, 2018. "Heterogeneous Responses to China and Oil Shocks: the G7 Stock Markets," Post-Print hal-02409120, HAL.
    • Handle: RePEc:hal:journl:hal-02409120
    DOI: 10.11130/jei.2018.33.3.488
    Note: View the original document on HAL open archive server: https://univ-pau.hal.science/hal-02409120
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    1. Selmi, Refk & Bouoiyour, Jamal & Miftah, Amal, 2019. "China's “New normal”: Will China's growth slowdown derail the BRICS stock markets?," International Economics, Elsevier, vol. 159(C), pages 121-139.
    2. Alqahtani, Abdullah & Selmi, Refk & Hongbing, Ouyang, 2021. "The financial impacts of jump processes in the crude oil price: Evidence from G20 countries in the pre- and post-COVID-19," Resources Policy, Elsevier, vol. 72(C).
    3. Selmi, Refk & Bouoiyour, Jamal & Miftah, Amal & Wohar, Mark E., 2021. "Managing exposure to volatile oil prices: Evidence from U.S. sectoral and industry-level data," Resources Policy, Elsevier, vol. 73(C).

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    More about this item

    Keywords

    G7 stock markets; Chinese economic slowdown; Oil shocks; Quantile-on-Quantile regression;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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