How do the stock prices of new energy and fossil fuel companies correlate? Evidence from China

Xiaoqian Wen, Yanfeng Guo, Yu Wei and Dengshi Huang

Energy Economics, 2014, vol. 41, issue C, 63-75

Abstract: This study documents the return and volatility spillover effect between the stock prices of Chinese new energy and fossil fuel companies using the asymmetric BEKK model. Based on daily samples taken from August 30, 2006 to September 11, 2012, the dynamics of new energy/fossil fuel stock spillover are found to be significant and asymmetric. Compared with positive news, negative news about new energy and fossil fuel stock returns leads to larger return changes in their counter assets. News about both new energy and fossil fuel stock returns spills over into variances of their counter assets, and the volatility spillovers depend complexly on the respective signs of the return shocks of each asset. The empirical results demonstrate that new energy and fossil fuel stocks are generally viewed as competing assets, that positive news about new energy stocks could affect the attractiveness of fossil fuel stocks and that new energy stock investment is more speculative and riskier than fossil fuel stock investment. These results have potential implications for asset allocation, financial risk management and energy policymaking.

Keywords: New energy stocks; Fossil fuel stocks; Market spillovers; Asymmetric BEKK; China (search for similar items in EconPapers)
JEL-codes: C22 C32 C51 E6 Q28 Q48 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (96)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:41:y:2014:i:c:p:63-75

DOI: 10.1016/j.eneco.2013.10.018

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