Impacts of Oil Price Shocks on the Returns of China's Listed Oil Companies

Abstract

Based on Structural Vector Auto-regression Model (SVAR), this paper divides global crude oil price shock into oil supply shock, global demand shock, domestic demand shock and precautionary demand shock. It analyzes the impacts of the four types of oil price shocks on the stock returns of China's oil exploitation industry, oil refinery industry and oil sales industry by impulse response function. The sample is from 1, 2008 to 12, 2013. The results show that all the returns of the three industries response to all the four oil price shocks positively, and the impacts of the three demand shocks are most significant. What's more, the returns of different industries response to different oil price shocks differently. The returns of oil exploitation industry is mainly influenced by domestic demand shock, while precautionary demand shock plays the dominant factor of the returns of oil exploitation and oil sales industries. In addition, the more connected with the market, the more significant the impacts of oil price shocks on the returns. Namely, the return of oil sales industry responses to all oil price shocks most significantly, that of oil refinery industry comes second and that of oil exploitation industry comes the last.