The Relationship between Crude Oil Futures Market and Chinese/US Stock Index Futures Market Based on Breakpoint Test.

Xunfa Lu,Hairong Cui,Kai Liu,Kin Keung Lai

doi:10.3390/e23091172

Abstract

Combined with the B-P (breakpoint) test and VAR–DCC–GARCH model, the relationship between WTI crude oil futures and S&P 500 index futures or CSI 300 index futures was investigated and compared. The results show that breakpoints exist in the relationship in the mean between WTI crude oil futures market and Chinese stock index futures market or US stock index futures market. The relationship in mean between WTI crude oil futures prices and S&P 500 stock index futures, or CSI 300 stock index futures is weakening. Meanwhile, there is a decreasing dynamic conditional correlation between the WTI crude oil futures market and Chinese stock index futures market or US stock index futures market after the breakpoint in the price series. The Chinese stock index futures are less affected by short-term fluctuations in crude oil futures returns than US stock index futures.

Highlights

According to the research process introduced in the previous section, the following results were obtained by estimating the VAR model, maximal information coefficient (MIC), DCC–GARCH model and B-P test
West Texas Intermediate (WTI) crude oil futures and S&P 500 stock index futures were studied for full sample and phased samples
The Granger causality test was conducted on log-returns of WTI crude oil futures and log-returns of S&P 500 stock index futures

Summary

Introduction

The results show that breakpoints exist in the relationship in the mean between WTI crude oil futures market and Chinese stock index futures market or US stock index futures market. There is a decreasing dynamic conditional correlation between the WTI crude oil futures market and Chinese stock index futures market or US stock index futures market after the breakpoint in the price series. The Chinese stock index futures are less affected by short-term fluctuations in crude oil futures returns than US stock index futures. It is well-known and accepted that crude oil is “the blood of industry” and an important commodity in international trade.

Methods

Results

Conclusion