How do China's petrochemical markets react to oil price jumps? A comparative analysis of stocks and commodities

Feng Liu, Shuai Shao and Chuanguo Zhang

Energy Economics, 2020, vol. 92, issue C

Abstract: The profound impacts of oil price jumps have caught the attention of scholars. Because the 2008 global financial crisis has seemingly already passed, the existence of oil price jumps is in doubt. In this paper, we provide evidence that the threat of dynamic jumps still exists in the global oil market in the post-crisis period, while the stocks and commodities of China's petrochemical markets are both affected by those jumps. To the best of our knowledge, this is the first study of the reaction of petrochemical markets to oil price jumps in the post-crisis period. In addition, a comparative analysis of petrochemical stocks and petrochemical commodity market is provided. In particular, we analyze the reactions of the returns and volatility of these markets to oil price jumps. We obtained the following findings. First, the returns of petrochemical stocks and petrochemical commodities are both negatively affected by current oil price jumps, while the effects of lagged jumps on these returns are opposite. Theoretically, the former is a reflection of panic induced by extreme risk information, while the latter is a reflection of rationality in speculators. Second, the volatilities of petrochemical stocks and petrochemical commodities respond differently to oil price jumps. The former is not affected, whereas the latter is positively and negatively affected by current and last oil price jumps, respectively. Finally, all the above conclusions still hold when considering the effects of normal oil price volatility, even after the co-movement between oil prices and petrochemical markets is eliminated.

Keywords: Global oil price jumps; Petrochemical stocks; Petrochemical commodities; Comparative analysis; Post-crisis period; China (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:92:y:2020:i:c:s0140988320303194

DOI: 10.1016/j.eneco.2020.104979

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