China's energy stock market jumps: To what extent does the COVID-19 pandemic play a part?

Abstract

The price jump behavior may bring tremendous challenges on risk management and asset pricing. This paper uses the BN-S test, the wavelet coherence method, and applies high-frequency data to explore whether and to what extent the COVID-19 pandemic impacts China's energy stock market jumps and its characteristics. The empirical results uncover the significant and heterogeneous interactions between the COVID-19 pandemic and China's energy stock market jumps across market specifications, investment horizons, and China/global pandemic tolls at different time scales. First, the oil stock market jumps were the most correlated with the pandemic, especially during the peak and re-deterioration phases. The pandemic played a positive and leading role in the short term (1–4 days length period) and long term (over 32 days length period). Second, the coal stock market jumps have similar characteristics to those of oil, but mainly show a negative correlation with the pandemic. Third, renewable energy stock market jumps were the least correlated, mainly showing a positive correlation in the short term and a negative correlation in the long term. In addition, the interaction characteristics of systemic co-jumps in different China's energy stock markets are also significant.