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

Authors
Journal
The Scientific World JOURNAL
2356-6140
Publisher
Hindawi (The Scientific World)
Publication Date
Volume
2013
Identifiers
DOI: 10.1155/2013/171868
Keywords
  • Research Article
Disciplines
  • Economics

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.

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