Shocks and Stocks: A Bottom-up Assessment of the Relationship Between Oil Prices, Gasoline Prices and the Returns of Chinese Firms

作者:Broadstock, DC (Broadstock, David C.)^{[ 1 ]} ; Fan, Y (Fan, Ying)^{[ 2 ]} ; Ji, Q (Ji, Qiang)^{[ 3 ]} ; Zhang, DY (Zhang, Dayong)^{[ 1 ]} 

Oil price shocks are known to affect the financial sector of the economy, due to the inflationary effects, and increasing costs of doing business they create. Though oil-shocks and financial markets are widely researched, there remains scope for deeper understanding using firm level data. We therefore contribute to the literature by extending widely applied multi-factor asset pricing models to a sample of 963 Chinese firms (between 2005-2013) to (i) systematically evaluate their reactions to oil price shocks, and (ii) further include regulated gasoline prices as a more direct measure of the energy-prices faced by firms. 89.2% of firms are susceptible to oil shocks, with positive and negative reactions observed even for firms within the same industry. Gasoline price shocks are more pervasive, affecting 95.7% of firms. Considering oil and gasoline separately allows us to review gasoline price regulation in China, which ultimately appears ineffective in achieving its intended goals.