The asymmetric impact of oil price shocks on China stock market: Evidence from quantile-on-quantile regression

Abstract

In this paper, we decompose oil price shocks into supply shocks, demand shocks, and risk shocks, and explore their asymmetric impact on China stock market. Applying the quantile-on-quantile regression approach, we find that supply shocks have no significant impact on China stock market which is in a bearish state, but positively affect the bullish market. Oil demand shocks have a greater positive impact on the bullish market than the bearish market. The negative risk shocks, suggesting a risk reduction, is beneficial for the stock market breaking away from the bearish state, but have no significant impact on the bullish market. Meanwhile, the positive risk shocks have a higher degree of negative influence on the bullish stock market than the bearish market.