The impact of crude oil market on stock market:evidence from the investor sentiment perspective

Zhao Lutao; Wang Shitong; Xing Yueyue

Abstract：The analysis of crude oil and stock market interactions is useful for assessing the impact of energy cost changes on economic growth.Using fine-grained aspect-level sentiment analysis to quantify online investor sentiment in the international crude oil market,the article constructs the Crude Oil Pressure Index(OPI,Crude Oil Pressure Index),which dissects the transmission effect of crude oil price changes on stock returns from the perspective of investor behavioral factors.Further,a rolling window quantile regression model is used to characterize the lagged,heterogeneous,and time-varying effects of the OPI on stock returns of eight major crude oil importing countries.The findings show that stock returns respond quickly and promptly to the crude oil stress index,the lagged effect is weaker than the contemporaneous effect,and the average negative impact on the stock returns of all eight countries reaches-3.42%under bear market conditions,but is weaker under bull market conditions.In addition,the synergistic movement between the two markets is exacerbated by shocks from extreme external events(the 2015 oil crisis,the New Crown Pneumonia epidemic,and the Russo-Ukrainian war).The article demonstrates that the OPI predicts stock market movements in advance,can be used as an important indicator to study the linkages between the oil and stock markets,and remains strongly explanatory for the stock market after the crisis period.The findings provide policy implications for stabilizing stock markets and macroeconomic stability in oil-importing countries.