The impact of oil price shocks on the risk-return relation in the Chinese stock market

This article contributes to the literature on the oil-stock nexus by examining the impact of the supply, demand, and risk shocks of oil prices on the risk-return relation in the Chinese stock market. We find that oil demand shock and oil risk shock rather than oil supply shock can Granger cause the stock risk-return relation. Further analysis based on regression models shows that oil demand shock and oil risk shock positively and negatively affect the stock risk-return relation, respectively. Especially, these significant effects are mainly presented in the post-financialization period of the oil market.