Abstract

This paper applies the BEKK-GARCH model to construct a comparative analysis of the heterogeneous relationship between the oil prices and stock prices of oil-related firms in the US and China. We find the following results. First, the effects of oil prices on stock returns depend heavily on the subsector category of an oil firm. Second, the effect from stock returns to oil prices displays distinguished country-specific patterns. The stock returns of oil firms in the US affect oil price, whereas stock returns of oil companies in China have limited influence on the oil market. Third, compared to the US, fewer Chinese oil company stocks are subject to risk spillover from oil market, but more stocks transmit their risks to oil market.

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