Tail Dependency and Risk Spillover between Oil Market and Chinese Sectoral Stock Markets—An Assessment of the 2013 Refined Oil Pricing Reform

Abstract

The Chinese refined oil pricing reform in 2013 has brought its refined oil price to be more aligned with the international oil price, helping to mitigate prior distorted pricing mechanisms. Its impact on the correlation, tail risks, and spillover effects between the international crude oil market and Chinese sectoral stock markets warrants empirical assessments. Time-varying copula models and conditional VaR (CoVaR) are employed to examine the correlation between the international oil market and Chinese sectoral stock indexes before and after the 2013 pricing reform, as well as the tail risk and spillover effects of the extreme and moderate oil markets. The results show that: (1) the correlation between the oil market and all 11 Chinese stock sectors is positive both before and after the reform, but the correlation is weaker after the reform than before; (2) The downside tail risk of the extreme and moderate oil markets to most Chinese stock market sectors, and the upside tail risk of the moderate oil market to most stock sectors are lower after the reform; (3) Tail risk spillover effects of extreme oil market on all sectors exist before and after the reform; (4) The upside tail risk spillover effects of moderate oil market exist in most sectors before the reform, but they almost all disappear after the reform. The downside risk spillover effects of the moderate oil market do not exist before or after the reform. The findings provide valuable references for portfolio management and future policy update.

Risk perception of COVID-19 and its related factors among centralized medical isolation groups in China

“…The gender variable was not correlated with the risk perception score, but a regression effect relationship existed. According to the usual standard and existing research practices, we believe that the gender variable was not correlated with risk perception scores ( Li and Chen, 2010 ; Sheng et al, 2022 ; Xiong et al, 2022 ). Therefore, we can get the following results in the CMI group: risk perceptions were higher for older age ( p < 0.01); risk perceptions were higher for higher education ( p < 0.01); risk perceptions were higher for those who had received the COVID-19 vaccination ( p < 0.05); and risk perceptions were higher for those who lived in a family with children ( p < 0.01).…”

Extreme risk measurement for the oil and China’s sectors system—network-based approach and machine learning methods

“…We can see several major peaks in the figure, which occur in 2013, 2015, 2020 and 2022, respectively, corresponding to the four crisis events: China's refined oil pricing reform, China's stock market crash, the COVID-19 and the conflict between Russia and Ukraine. Total systemic risk connectivity reached its first peak in 2013, which was mainly influenced by China's further improvement of refined oil product price reform in 2013 [47]. China is among the world's major oil importers, and the reform of the refined oil product pricing mechanism has increased the correlation between Chinese oil prices and the oil market.…”

“…This may be due to the relatively stable supply chain and pricing mechanism of China's energy sector, which can mitigate the shock of fluctuations in the oil market to some extent. Moreover, the Chinese government has a greater capacity to intervene in the energy market and stronger regulatory tools, and this control capacity can mitigate the negative impact of fluctuations in international energy markets [47]. Similar to the energy sector, China's commodity sector has been insulated from the adverse effects of large fluctuations in the oil market by government controls.…”