Relationship between International Crude Oil Price and Stock Price in China : Empirical Test Based on MSVAR Model

Based on regime shifts test with MSAR model,The paper estimates the MSVAR model to investigate the interactive relationships between stock market and oil price using monthly data ranging from Jan 1991 to Jul 2014. The results show that the volatilities of both stock market and crude oil price are of regime shifts, and the persistence of low volatility regime is stronger than that of high volatility. The current stock market return is highly and nonlinearly dependent on the historical data. China's stock market is characteristic of positive feedback. There is unidirectional and asymmetric causality that runs from world oil shock to stock market