Impact Mechanism Of Structural Oil Price Shock On Financial Market Uncertainty

Historically,oil price booms and busts have had a big impact on the global economy.The outbreak of the global crisis in 2008 led to the collapse of crude oil prices,while the stock market also had large fluctuations.The simultaneous fluctuations of the two markets made scholars realize that the impact of crude oil price fluctuations on the financial market cannot be ignored,especially after the outbreak of the financial crisis,the correlation between the two markets has been increasing.The impact of crude oil market on financial market has always been the focus of scholars’ research,but few scholars consider whether different types of oil price shocks have different impacts on financial market from the factors affecting oil price fluctuations.At the same time,scholars mainly focus on a certain financial market or several major financial markets,and seldom study the financial market as a whole.And the outbreak of financial crisis is not overnight,the uncertainty of the financial market negative accumulation of financial risks,financial risk accumulation after the outbreak will lead to the financial crisis.Therefore,it is of great significance to reduce the accumulation of negative uncertainties in the financial market from the source to control the aggregation and diffusion of financial risks and prevent the outbreak of financial crisis.Therefore,this thesis adopts the latest DY spillover index method and the latest oil price decomposition method proposed by Ready(2018).Firstly,the oil price is decomposed structically,and then the volatility spillover system of oil price shock and implied volatility index of stock market is constructed to explore the influence mechanism of oil price shock on financial market uncertainty.To be specific: First,oil price shocks are subdivided into demand shocks,supply shocks and risk shocks according to the structural oil price decomposition method of Ready(2018).Secondly,compared with other commonly used indicators such as actual volatility,the implied volatility index is creatively selected in this thesis to measure the uncertainty of the financial market.This index is more accurate and forward-looking,and can reflect the degree of panic of investors to some extent while reflecting the volatility of the financial market.The implied volatility indices of eight representative countries are selected as research objects,including developed markets and emerging markets.Then,considering that the traditional linear Granger causality test fails to test non-linear causality,this thesis studies whether structural oil price shock is the Granger cause of financial market uncertainty from both linear and nonlinear perspectives,and preliminarily verifies whether oil price shock has an impact on financial market uncertainty.Finally,this thesis uses Diebold and Yilmaz(2009,2012,2014)’s volatility spillover index method to quantitatively analyze the static spillover effects between the three shocks and each country,and then combines the rolling window method to obtain the dynamic spillover results,and further analyzes whether the test results are robust in different time periods.The results show that different price shocks have different impacts on financial market uncertainty,risk shocks have the greatest impact on financial market uncertainty,and supply shocks have the least impact.The spillover effects of the three oil price shocks on financial market uncertainty are time-varying,which may be related to the occurrence of important events.The impact of the rise and fall of crude oil price on the spillover effect of the triple shocks is different.For different countries,the commonality is that risk shocks always have the greatest impact on spillover effects.The spillover effects of demand shock and supply shock are different in different countries and time periods.Therefore,policy makers should focus on the impact of risk shocks when formulating corresponding policies.When making investment,investors should be aware of the impact of oil price shock on the uncertainty of the financial market,and make a reasonable investment portfolio to diversify investment risks.