Abstract
This paper investigates the time-varying impact of oil price uncertainty on stock prices in China using weekly data on ten sectoral indices over the period January 1997-Febraury 2014. The estimation of a bivariate VAR-GARCH-in-mean model suggests that oil price volatility affects stock returns positively during periods characterised by demand-side shocks in all cases except the Consumer Services, Financials, and Oil and Gas sectors. The latter two sectors are found to exhibit a negative response to oil price uncertainty during periods with supply-side shocks instead. By contrast, the impact of oil price uncertainty appears to be insignificant during periods with precautionary demand shocks.
Highlights
A number of empirical studies have focused on the impact of oil price changes on Chinese stock returns
The results suggest that oil price volatility affects stock returns positively during periods characterised by demand-side shocks in all cases except the Consumer Services, Financials, and Oil and Gas sectors
This paper investigates the time-varying impact of oil price uncertainty on stock prices in China using weekly data on ten sectoral indices: Healthcare, Telecommunications, Basic Materials, Consumer Services, Consumer Goods, Financials, Industrials, Oil and Gas, Utilities, and Technology
Summary
Oil Price Uncertainty and Sectoral Stock Returns in China: A Time-Varying Approach. Guglielmo Maria Caporalea,b,c*, Faek Menla Alia and Nicola Spagnoloa,d aDepartment of Economics and Finance, Brunel University, London, UK bCESifo, Munich, Germany cDIW Berlin, Germany dCentre for Applied Macroeconomic Analysis (CAMA), Canberra, Australia.
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