How do fossil energy prices affect the stock prices of new energy companies? Evidence from Divisia energy price index in China's market

With the shale gas revolution and the maturity of new energy technologies, the global oil-based energy pattern began to be remodeled worldwide. From the perspective of China, coal has played a dominant leading role in the energy structure. Therefore, it is becoming increasingly irrational to replace...

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Bibliographic Details
Published inEnergy (Oxford) Vol. 169; pp. 637 - 645
Main Authors Sun, Chuanwang, Ding, Dan, Fang, Xingming, Zhang, Huiming, Li, Jianglong
Format Journal Article
LanguageEnglish
Published Oxford Elsevier Ltd 15.02.2019
Elsevier BV
Subjects
Autoregressive models
Divisia energy price index
Energy
Energy industry
Energy technology
Fluctuations
Fossil fuels
Fuels
Natural gas
New energy stocks
Oil
Prices
Shale
Shale gas
Stock prices
VAR model
China
New energy stocks
Divisia energy price index
VAR model
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Summary:With the shale gas revolution and the maturity of new energy technologies, the global oil-based energy pattern began to be remodeled worldwide. From the perspective of China, coal has played a dominant leading role in the energy structure. Therefore, it is becoming increasingly irrational to replace fossil fuels with oil. This paper considers the impact of fluctuations of three fossil energy (oil, coal and natural gas) prices on new energy companies stock prices to meet the needs of policy makers and investors in this rapidly developing field. Due to the incomplete substitution among fossil fuels, this paper uses the Divisia price synthesis method to synthesize these three prices into a composite price index. Furthermore, we use a variable vector autoregressive model to explore dynamic relationships among stock prices of new energy companies and technology companies, fossil energy prices and carbon futures prices. The results reveal that previous stock prices of new energy companies had the most significant impact on the current level. However, fossil energy prices account for only a small part of stock price fluctuations of new energy companies. •Synthesizing prices of coal, oil and natural gas into a Divisia price index.•Exploring impacts of fossil energy price changes on new energy stock prices.•Historical stock prices of new energy company have the most significant impact on the current level.•Technology stock prices have a greater impact on new energy stock prices than fossil energy prices.
ISSN:0360-5442
1873-6785
DOI:10.1016/j.energy.2018.12.032