 The international natural gas price and its cross-sectional pricing implication: Evidence from Chinese stock marketZhiwei Xu, Xuefei Wang and Teng Zhang Energy, 2024, vol. 313, issue C Abstract: This study investigates the role of international natural gas returns in the cross-sectional pricing of Chinese stocks. We find that stocks with higher sensitivity to the Henry-Hub natural gas returns (i.e., higher natural gas return beta) exhibit significantly lower future returns, suggesting a negative natural gas price risk premium. By exploring the underlying mechanism, we find that the results are consistent with the hedging demand theory that rational investors seek stocks with high potential to hedge against natural gas price risk but not driven by mispricing channel. Additionally, we demonstrate that the predictability of the Henry-Hub natural gas return beta for stock returns cannot be explained by other macro-betas, and this effect is primarily evident in manufacturing firms. However, we do not observe significant pricing effects from the Asian and European natural gas returns. Keywords: Henry hub spot price; The international natural gas return beta; Cross-sectional stock returns; Intertemporal hedging demand (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:313:y:2024:i:c:s0360544224037174 DOI: 10.1016/j.energy.2024.133939 Access Statistics for this article Energy is currently edited by Henrik Lund and Mark J. Kaiser More articles in Energy from Elsevier |
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