How do fossil energy prices affect the stock prices of new energy companies? Evidence from Divisia energy price index in China's market. (15th February 2019)

• Record Type: Journal Article
• Authors: Sun, Chuanwang; Ding, Dan; Fang, Xingming; Zhang, Huiming; Li, Jianglong
• Is Part Of: Energy. Volume 169(2019)
• Page Start: 637
• Page End: 645
• Publication Date: 2019-02-15
• Subjects: Divisia energy price index -- New energy stocks -- VAR model; Power resources -- Periodicals; Power (Mechanics) -- Periodicals; Energy consumption -- Periodicals; 333.7905
• DOI: 10.1016/j.energy.2018.12.032
• Languages: English
• ISSNs: 0360-5442

Abstract

Abstract: 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. Highlights: 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.