Relationships among Energy Price Shocks, Stock Market, and the Macroeconomy: Evidence from China

Rong-Gang Cong and Shaochuan Shen

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the interactive relationships among China energy price shocks, stock market, and the macroeconomy using multivariate vector autoregression. The results indicate that there is a long cointegration among them. A 1% rise in the energy price index can depress the stock market index by 0.54% and the industrial value-adding growth by 0.037%. Energy price shocks also cause inflation and have a 5-month lag effect on stock market, which may result in the stock market “underreacting.” The energy price can explain stock market fluctuations better than the interest rate over a longer time period. Consequently, investors should pay greater attention to the long-term effect of energy on the stock market.

Keywords: Oil price; Stock market (search for similar items in EconPapers)
JEL-codes: Q4 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:112211

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