Study On The Tail Risk Spillover Effects Between Oil Markets And Stock Markets

Oil is a very important energy source.Its price fluctuation will affect the cost and price of most commodities,affect the real economy and eventually transmit to the financial market.In addition,with the development of financial derivatives such as options and futures,oil has already become an important financial commodity.The change of oil price will bring about the cross-market flow of capital.On the other hand,oil is also a kind of strategic resource,which often leads to its political connection.Therefore,oil prices will be affected by various factors such as oil production,global macroeconomic situation,capital market,geopolitics,speculative sentiment of investors and climate environment,and at the same time,risk spillovers will occur to these influencing factors.The stock market is the most representative of a country’s macroeconomic situation.Therefore,there must be some correlation between the stock market and the oil market.Based on this background,it is of great significance to study the tail risk spillover between the oil market and the stock market in order to promote the coordinated development of the oil market and the economies of various countries.Firstly,this paper introduces the significance of oil to the global economic development,expounds the possible ways of risk transmission between oil market and stock market and the inevitable relationship between them,and studies the tail risk spillover of oil market return rate and stock market index return rate.In the empirical aspect,the daily data from January 4,2000 to August 31,2019 are taken as samples,and the variational modal decomposition(VMD),GJR GARCH and Copula models are used to fit the sample data and select the best model.On this basis,we measure the direction and intensity of tail risk spillovers between oil market returns and stock market index returns through VaR and Co VaR,and study the tail risk spillovers between oil market returns and stock market index returns under different market conditions and different investment periods,and discuss the symmetry of tail risk spillovers between the two markets.The main conclusions are as follows:First,there are two-way tail risk spillovers between oil market returns and stock market index returns,in which the oil market returns are positive for the upper tail risk spillovers of stock market index returns in most countries,and also positive for the downside risk spillover of the stock market index yield in all countries in the sample.Secondly,the stock market index returns have a positive effect on the risk spillovers of the oil market returns.Third,from the direction and intensity of tail risk spillover,the tail risk spillover effect between oil market return and stock market index return is asymmetric.Fourthly,under different market conditions and different investment periods,the tail risk spillover effect between the oil market return and the stock market index return is also asymmetric.Finally,based on the empirical results,some policy recommendations are put forward for investors,regulators and policymakers.In addition,further research directions and ideas are proposed.