Oil prices and stock market in China: A sector analysis using panel cointegration with multiple breaks
AbstractThis paper investigates the relationship between oil prices and the Chinese stock market at the sector level. In a panel cointegration and Granger causality framework, the major sectors in China are studied using data collected from July 2001 to December 2010. When the effects of cross-sectional dependence and multiple structural breaks are taken into account, the panel cointegration relationship between oil prices and stock prices is confirmed at the disaggregated sector level. The results indicate that there is some evidence of structural breaks in the interaction between oil prices and Chinese sectoral stocks. The long-run estimates suggest that the real oil price has a positive effect on sectoral stocks in the long run. The Granger causality tests demonstrate a unidirectional, short-run Granger causality relationship running from oil prices and sectoral stocks to the interest rate for 2001/07–2005/10. There is also a unidirectional, long-run Granger causality running from sectoral stocks to the interest rate for 2001/07–2005/10 and 2005/12–2007/06. However, the long-run Granger causality is bidirectional between oil prices, the interest rate and sectoral stocks for 2007/08–2008/11 and 2009/01–2010/12. Meanwhile, the short-run Granger causality is also bidirectional between the interest rate and oil prices.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 34 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/eneco
Oil prices; Stock prices; Panel cointegration; Cross-sectional dependence; Granger causality;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
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