Linkages between crude oil and emerging Asian stock markets: New evidence from the Chinese stock market crash

Abstract

This study examines returns and volatility spillover between crude oil and emerging Asian stock markets during the Chinese stock market crash of 2015. The empirical findings reveal a positive causal effect from crude oil price changes to the majority stock markets. Volatility is transmitted from oil to the Indian and Korean stock markets. The weights of oil assets in oil-stock portfolios decrease during the Chinese market crash compared to the full sample and the US financial crisis. Lastly, less oil assets are required to minimize portfolio risk in the Chinese crisis than in the full sample or US crisis.