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Reinvestigating the Oil Price–Stock Market Nexus: Evidence from Chinese Industry Stock Returns
Author(s) -
Fang Sheng,
Lu Xinsheng,
Egan Paul G.
Publication year - 2018
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/cwe.12242
Subject(s) - stock (firearms) , oil price , volatility (finance) , economics , oil storage trade , monetary economics , china , stock market , crude oil , manufacturing , financial economics , business , mechanical engineering , paleontology , horse , political science , law , petroleum engineering , biology , engineering , marketing
The present study investigates the influence of international oil prices on China's stock market returns across 29 different industries. The paper attempts to account for any structural breaks and nonlinearity in this relationship. The results reveal that the effect of changes in the international price of oil on stock returns differs substantially across industries. The stock returns of the coal, chemical, mining and oil industries are found to be positively affected by crude oil price movements. Conversely, electronics, food manufacturing, general equipment, pharmaceuticals, retail, rubber and vehicle industries are found to be negatively affected by movements in the price of crude oil. The results of the estimations also suggest that the majority of Chinese industries have been significantly affected by oil prices since 2004. The influence of international oil prices on Chinese stocks also has a stronger effect in the presence of high volatility but the effect varies across industries.