Oil Price Uncertainty and Sectoral Stock Returns in China: A Time-Varying Approach

27 Pages Posted: 23 Jul 2014

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University - Centre for Empirical Finance

Faek Menla Ali

University of Sussex -University of Sussex Business School

Nicola Spagnolo

Brunel University

Multiple version iconThere are 2 versions of this paper

Date Written: July 22, 2014

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.

Keywords: China, oil price uncertainty, sectoral stock returns

JEL Classification: C32, Q43

Suggested Citation

Caporale, Guglielmo Maria and Menla Ali, Faek and Spagnolo, Nicola, Oil Price Uncertainty and Sectoral Stock Returns in China: A Time-Varying Approach (July 22, 2014). CESifo Working Paper Series No. 4881. Available at SSRN: https://ssrn.com/abstract=2469749

Guglielmo Maria Caporale (Contact Author)

Brunel University - Centre for Empirical Finance ( email )

Uxbridge UB8 3PH
United Kingdom

Faek Menla Ali

University of Sussex -University of Sussex Business School ( email )

Falmer
Brighton, East Sussex BN1 9SL
United Kingdom

Nicola Spagnolo

Brunel University ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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