Shocks and stocks: A bottom-up assessment of the relationship between oil prices, gasoline prices and the returns of Chinese firms

David Clive Broadstock, Ying Fan, Qiang Ji, Dayong Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

38 Citations (Scopus)

Abstract

Oil price shocks are known to affect the financial sector of the economy, due to the inflationary effects, and increasing costs of doing business they create. Though oil-shocks and financial markets are widely researched, there remains scope for deeper understanding using firm level data. We therefore contribute to the literature by extending widely applied multi-factor asset pricing models to a sample of 963 Chinese firms (between 2005-2013) to (i) systematically evaluate their reactions to oil price shocks, and (ii) further include regulated gasoline prices as a more direct measure of the energy-prices faced by firms. 89.2% of firms are susceptible to oil shocks, with positive and negative reactions observed even for firms within the same industry. Gasoline price shocks are more pervasive, affecting 95.7% of firms. Considering oil and gasoline separately allows us to review gasoline price regulation in China, which ultimately appears ineffective in achieving its intended goals.
Original languageEnglish
Pages (from-to)55-86
Number of pages32
JournalEnergy Journal
Volume37
DOIs
Publication statusPublished - 1 Jan 2016
Externally publishedYes

Keywords

  • China
  • Financial markets
  • Firm-level
  • Gasoline price shocks
  • Oil price shocks

ASJC Scopus subject areas

  • Economics and Econometrics
  • Energy(all)

Cite this