Abstract
This paper decomposes daily crude oil shocks into demand shock, supply shock and risk shock. Then, it employs Diebold and Yilmaz connectedness index approach to explore the differences for the time-varying effect of different types of structural shocks on new energy stock markets in China, Europe and the United States during the period 10 June 2009–30 October 2018. The new findings show that: 1) There are time-varying features of structural shocks to all new energy markets. 2) The crude oil demand shock and risk shock have a large explanatory ability on the returns of all new energy stock markets, while the crude oil supply shock has a small impact. 3) The influences of crude oil demand shocks on the market returns of new energy in China, Europe and the United States are 1.31%, 8.64%, and 4.47%, respectively; however, the affection of crude oil risk shocks to the market returns of new energy in the same markets are 3.17%, 7.91%, and 21.51%, respectively. 4) The crude oil demand shock and supply shock have little impact on any new energy market volatilities, but the effects of crude oil risk shocks to China and the United States’ new energy market volatilities are 2.44% and 3.14%, respectively.
Highlights
The complex linkage mechanism for crude oil prices and new energy markets has always been of concern in various countries
These results show that the affection of demand shock on the new energy markets in China, Europe and the United States is 1.31%, 8.64%, and 4.47%, respectively
These results show that the supply shock has little impact on these new energy markets in China, Europe and the United States
Summary
The complex linkage mechanism for crude oil prices and new energy markets has always been of concern in various countries. Since crude oil acts as one of the significantly important primary energy for the economic activities of various countries, its price has an impact on new energy markets (Shi and Sun, 2017; Cheng et al, 2019). High crude oil prices prompted many countries to adopt active new energy policies to rapidly develop their own new energy. Due to differences in economic development level, energy and resource endowment, primary energy consumption structure and new energy policies, the effect of crude oil price shocks to new energy markets in various countries or regions may vary. Market investors pay special attention to the reaction of new energy markets in different countries or regions to the influence of crude oil prices. The study of the dynamic effect of oil price shocks to new energy stock markets for different countries is conducive to a comprehensive grasp of the connectedness mechanism for oil
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