Oil shocks and their impact on energy related stocks in China

Abstract

This paper contributes to the current literature by adopting dynamic conditional correlation and asset pricing models to discover how the dynamics of international oil prices affect energy related stock returns in China. After conditioning for structural instability, the results show a much stronger relation following the 2008 financial crisis. We argue that this reflects the fact that investors in the Chinese stock market, especially for energy related stocks, are more sensitive to the shocks in international crude oil market.

Causality in distribution between European stock markets and commodity prices: using independence test based on the empirical copula

“…Existing studies present different results; some find that there is no significant effect of oil price shocks on stock prices [Cong et al 2008;Hammoudeh, Choi 2006;Mohanty, Nandha, Bota 2010;Maghyereh 2004;Sari, Soytas 2006], others find a significant positive impact of oil prices on stock prices [Narayan, Narayan 2010;Nguyen, Bhatti 2012;Broadstock, Cao, Zhang 2012;Mohanty et al 2011], while still others find a significant negative effect [Aloui, Jammazi 2009;Park, Ratti 2008;Cifarelli, Paladino 2010]. Hence, the evidence from the existing literature on the significance and sign of the impact of oil price changes on stock prices is still inconclusive.…”

“…The majority of these studies examine the AsianPacific region [Cong et al 2008;Narayan, Narayan 2010;Nguyen, Bhatti 2012;Broadstock, Cao, Zhang 2012;Zhu, Li, Li 2014]. Several researchers investigate the relationship between oil prices and stock returns of the GCC (Gulf Cooperation Council) countries [Mohanty et al, 2011;Hammoudeh, Choi 2006;Arouri, Lahiani, Nguyen 2011;Arouri, Rault 2012].…”

The Asymmetric Effects of Oil Price Shocks on the Chinese Stock Market: Evidence from a Quantile Impulse Response Perspective

“…In addition, the Chinese stock market has been the second largest in terms of both trading volume and capitalization. Therefore, a lot of literature has focused on the link between oil prices and the Chinese stock market [23][24][25][26][27][28][29][30]. These studies however, do not elaborate various complexities in the link between oil price and stock prices.…”

The relationship between international crude oil prices and China’s refined oil prices based on a structural VAR model

“…However, the China domestic refined oil pricing mechanism is not fully market-oriented and it is subject to direct government control (Liao et al 2016). Consequently, there is an urgent need for qualitative and quantitative analysis of the relationship between international crude oil prices and domestic oil prices as well as the feedback mechanism (Zhang and Xie 2016;Broadstock et al 2012;Du et al 2010). As the China domestic refined oil price has been strongly influenced by the fluctuating international oil price, the current pricing mechanism fails to fully reflect the real supply and demand situation and petrochemical enterprise costs.…”