Asymmetry effect of oil price shocks and the lagging effect of oil price jumps: Evidence from China's automobile markets

Abstract

Considering the close relationship between the automobile market and the oil market, as well as the increasing dependence on foreign oil in China, it is worth focusing on the impact of global oil price fluctuations on China's automobile markets. This paper investigates the impact of different fluctuations in the global oil market on China's automobile market returns. First, the ARMA-EGARCH-ARJI model is applied to describe the characteristics of global oil fluctuations. Then, we use three specific models to discuss the impact of the expected and unexpected global oil price shocks and the global oil price jumps and explore whether there are corresponding price jumps in the automobile markets. We find that there are asymmetric effects of the influences of the expected and unexpected global oil shocks. Moreover, there is a lag effect of the global oil price jumps on the automobile markets. In addition, global oil price jumps lead to ‘U-shaped’ responses in the automobile markets. In contrast to the literature, we introduce factors of price jumps into the subject market and the global oil market, and we discuss the effects of different types of global oil price shocks in detail, especially those concerning the influence of oil price jumps.