How do fossil energy prices affect the stock prices of new energy companies? Evidence from Divisia energy price index in China's market

Chuanwang Sun, Dan Ding, Xingming Fang, Huiming Zhang and Jianglong Li

Energy, 2019, vol. 169, issue C, 637-645

Abstract: With the shale gas revolution and the maturity of new energy technologies, the global oil-based energy pattern began to be remodeled worldwide. From the perspective of China, coal has played a dominant leading role in the energy structure. Therefore, it is becoming increasingly irrational to replace fossil fuels with oil. This paper considers the impact of fluctuations of three fossil energy (oil, coal and natural gas) prices on new energy companies stock prices to meet the needs of policy makers and investors in this rapidly developing field. Due to the incomplete substitution among fossil fuels, this paper uses the Divisia price synthesis method to synthesize these three prices into a composite price index. Furthermore, we use a variable vector autoregressive model to explore dynamic relationships among stock prices of new energy companies and technology companies, fossil energy prices and carbon futures prices. The results reveal that previous stock prices of new energy companies had the most significant impact on the current level. However, fossil energy prices account for only a small part of stock price fluctuations of new energy companies.

Keywords: Divisia energy price index; New energy stocks; VAR model (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (75)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:169:y:2019:i:c:p:637-645

DOI: 10.1016/j.energy.2018.12.032

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