Spillover effect and Granger causality investigation between China's stock market and international oil market: A dynamic multiscale approach

With the rapid development of China's economy and the increasing dependence of crude oil on foreign countries, the relationship between China's stock market and the international oil market is becoming closer and closer. Aiming to explore the interrelation of the two markets theoretically and empirically, the linear and nonlinear Granger causality tests combined with the bivariate empirical mode decomposition model are used to evaluate the dynamic multiscale interaction and the volatility effect between China's stock market and the international oil market. With the Shanghai stock index and Brent Spot Price (FOB price) as empirical study samples, some interesting conclusions emerged. There is a bi-directional nonlinearity between the two markets, but the relationship between international crude oil price and China's stock market shows a gradual strengthening trend. The Granger causality between China's stock market and the international oil market is relatively diverse and is varying with different timescales. And when analyzing the inner factors either in the Brent oil market or the stock market, we need to consider the spillover effect between the two markets. (C) 2019 Elsevier B.V. All rights reserved.