The dynamic information spill-over effect of WTI crude oil prices on China’s traditional energy sectors
China Agricultural Economic Review
ISSN: 1756-137X
Article publication date: 27 July 2018
Issue publication date: 22 August 2018
Abstract
Purpose
The purpose of this paper is to explore the dynamic influence of WTI crude oil returns on the stock returns of China’s traditional energy sectors, including oil and gas exploitation, coal mining and processing, petroleum processing and coking, electricity, heat production and supply and mining services.
Design/methodology/approach
Hong’s information spill-over test and the DP Granger causality test are applied to investigate the relationship between the two markets. Moreover, a rolling window is introduced into the above two tests to capture time-varying characteristics of the influence of WTI crude oil returns.
Findings
The empirical results indicate that, first, there exists significant bidirectional linear causality between WTI crude oil returns and China’s traditional energy sectoral stock returns, but the nonlinear causality appears weaker. Second, the influence of WTI crude oil returns on traditional energy sectoral stock returns has time-varying characteristics and industry heterogeneity both in the linear and nonlinear cases. Finally, the decline of WTI crude oil prices may strengthen its linear influence on the stock returns of traditional energy sectors, while the excessive rise of market values in traditional energy sectors may weaken the linear and nonlinear influence of WTI on them.
Originality/value
The general nexus between international crude oil market and China’s traditional energy stock market is explored both in the linear and nonlinear perspectives. In particular, the dynamic linear and nonlinear influence of WTI crude oil returns on China’s traditional energy sectoral stock returns and its industry heterogeneity are analysed in detail.
Keywords
Acknowledgements
The authors gratefully acknowledge the financial support from National Natural Science Foundation of China (Nos 71273028, 71322103 and 71774051), National Program for Support of Top-notch Young Professionals (No. W02070325), Changjiang Scholars Program of the Ministry of Education of China (No. Q2016154), and Hunan Youth Talent Program. The authors also acknowledge the respectable editor and reviewers, as well as the seminar participants at the Centre for Resource and Environmental Management, Hunan University, for their insightful comments.
Citation
Zhang, Y.-J. and Wu, Y.-B. (2018), "The dynamic information spill-over effect of WTI crude oil prices on China’s traditional energy sectors", China Agricultural Economic Review, Vol. 10 No. 3, pp. 516-534. https://doi.org/10.1108/CAER-05-2017-0094
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited