Detecting speculative bubbles in the Chinese energy market: evidence from a GSADF test

Jing Luo and Sirui Li

Applied Economics, 2025, vol. 57, issue 49, 8146-8159

Abstract: Analysing bubbles in China’s energy futures market facilitates the identification of the unique driving factors of bubbles in emerging markets. We apply the Generalized Supremum Augmented Dickey-Fuller (GSADF) and Supremum Augmented Dickey-Fuller (SADF) to verify the bubbles of crude oil (SC), power coal (ZC) and liquefied petroleum gas (LPG). Furthermore, we use the GSADF method to identify the definite generation and bursting times of these futures. The empirical results show that three bubbles occurred in the SC and LPG markets between 22 June 2020 and 26 September 2022 while four occurred in ZC during the same period. As an international commodity, SC bubbles are highly influenced by global factors, such as the global economy and geopolitical situation. In China, ZC bubbles are mainly influenced by domestic factors, such as price guidance, environmental protection policies and power demand. LPG bubbles are influenced by global oil prices and domestic policy regulations. Therefore, based on the timely bubble detection method, policymakers may take ex ante measures, such as regularly assessing the risk of bubbles and augmenting supply in the spot market, rather than simply adopting ex post strict price control. Additionally, investors and entrepreneurs can take early risk-hedging steps to reduce potential losses.

Date: 2025
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DOI: 10.1080/00036846.2024.2396087

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