nach oben

Review of Quantitative Finance and Accounting

Erschienen in:

01.08.2013 | Original Research

Oil and stock market activity when prices go up and down: the case of the oil and gas industry

verfasst von: Sunil K. Mohanty, Aigbe Akhigbe, Tawfeek A. Al-Khyal, Turki Bugshan

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 2/2013

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

We examine the asymmetric effects of daily oil price changes on equity returns, market betas, oil betas, return variances, and trading volumes for the US oil and gas industry. The responses of stock returns associated with negative changes in oil prices are higher than that associated with positive changes in oil prices. Stock risk measured by market beta is influenced more due to oil price decreases than due to oil price increases. On the other hand, oil risk exposures (oil betas) and return variances are more influenced by oil price increases than oil price decreases. The results of our study indicate that oil and gas firm returns, market betas, oil betas, return variances respond asymmetrically to oil price changes. We also find that relative changes in oil prices along with firm-specific factors such as firm size, ROA, leverage, market-to-book ratio (MBR) are important in determining the effects of oil price changes on oil and gas firms’ returns, risks, and trading volumes.

Vorheriger Artikel Value at risk estimation by quantile regression and kernel estimator

Nächster Artikel Managerial flexibility and the wealth effect of new product introductions

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

The business and popular press certainly believe that oil prices influence stock prices. For example, during the years 2005 and 2006, oil prices figured in the headlines of the Wall Street Journal on 204 days and most of these reports suggest that returns on stock markets are sensitive to oil price changes (the search term used are “oil prices,” “oil price,” ‘oil prices and stocks,” and “oil price and stocks”).

Hou and Robinson (2006) show that the structure of product markets (industry concentration) affects stock return and risk. They argue that firms make operating decisions based on strategic interactions between market participants, which, in turn, may affect the riskiness of their cash flows and rates of return. For example, firms in less concentrated industries are likely to behave differently in response to oil price changes from those that operate in more concentrated industries where barriers to entry are high and the competition is low.

Bettendorf et al.(2009) find that the positive shock to the crude oil price has a greater effect on the variance of the retail price than a negative shock.

Proponents of sectoral shocks (sectoral shift) hypothesis [e.g., Lilien (1982) and Davis (1987)] suggest that when oil prices fall or rise resources are likely to be reallocated from declining to expanding sectors of the economy.

Previous research provides theoretic models related to asymmetric news and risk in equity markets (e.g., Engle and Ng 1993; Bekaert and Wu 2000; and Wu 2001).

Crude oil prices rose steadily from an average of $31/barrel in April 2003 to the record peak at $147/barrel in July 2008.

Growth firms are more likely to experience higher stock returns, return volatilities, market risks, oil risk exposures, and trading volumes than value firms.

An industry’s profitability is more likely to be positively related to the degree of industry concentration and market power (e.g., Hou and Robinson 2006).

Ball L, Mankiw G (1994) Asymmetric price adjustment and economic fluctuations. Econ J 104:247–261CrossRef

Basher SA, Sadorsky P (2006) Oil price risk and emerging stock markets. Global Fin J 17:224–251CrossRef

Bekaert G, Wu G (2000) Asymmetric volatility and risk in equity markets. Rev Fin Stud 13:1–42CrossRef

Bernanke B (1983) Nonmonetary effects of the financial crisis in the propagation of the great depression. Am Econ Rev 73:257–276

Bettendorf L, Van der Geest SA, Kuper GH (2009) Do daily retail gasoline prices adjust asymmetrically? J Appl Stat 36:385–397CrossRef

Borenstein S, Cameron AC, Gilbert R (1997) Do gasoline prices respond symmetrically to crude oil price changes? Q J Econ 112:305–339CrossRef

Boyer MM, Filion D (2007) Common and fundamental factors in stock returns of Canadian oil and gas companies. Energy Econ 29(3):428–453CrossRef

Chen NF, Roll R, Ross SA (1986) Economic forces and the stock market. J Bus 59:383–403CrossRef

Cong RG, Wei YM, Jaio JL, Fan Y (2008) Relationships between oil price shocks and stock market: an empirical analysis from China. Energy Policy 36:3544–3553CrossRef

Davis S (1987) Allocative disturbances and specific capital in real business cycles theories. Am Econ Rev 77:326–332

Dayanandan A, Donker H (2011) Oil prices and accounting profits of oil and gas companies. Int Rev Fin Anal 20(5):252–257CrossRef

Driesprong G, Jacobsen B, Maat B (2008) Striking oil: another puzzle? J Financ Econ 89(2):307–327CrossRef

Engle R, Ng V (1993) Measuring and testing the impact of news on volatility. J Fin 48:1749–1778CrossRef

Fama E (1990) Stock returns, expected returns, and real activity. J Fin 45:1089–1108CrossRef

Ferderer J (1996) Oil price volatility and the macroeconomy: a solution to the asymmetry puzzle. J Macroecon 18:1–16CrossRef

Frey G, Manera M (2007) Econometric models of asymmetric price transmission. J Econ Surv 21(2):349–415CrossRef

Godby R, Lintner AM, Stengos T, Wandschneider B (2000) Testing for asymmetric pricing in the Canadian retail gasoline market. Energy Econ 22:349–368CrossRef

Gogineni S (2010) Oil and the stock market: an industry level analysis. Fin Rev 45:995–1010CrossRef

Hamilton JD (1983) Oil and macro-economy since World War II. J Polit Econ 91(2):228–248CrossRef

Hamilton JD (1988) Are the macroeconomic effects of oil price changes symmetric? A comment. Carnegie-Rochester Conf Ser Public Policy 28:369–378CrossRef

Hamilton JD (2003) What is an oil shock? J Econom 113:363–398CrossRef

Hamilton JD (2009) Understanding crude oil prices. Energy J 30:179–206

Hammoudeh S, Li H (2005) Oil sensitivity and systematic risk in oil-sensitive stock markets. J Econ Bus 57:1–21CrossRef

Hou K, Robinson DT (2006) Industry concentration and average stock returns. J Fin 61(4):1927–1956CrossRef

Huang R, Masulis R, Stoll H (1996) Energy, shocks and financial market. J Futur Mark 16:1–27CrossRef

Huang B, Hwang M, Peng H (2005) The asymmetry of the impact of oil price shocks on economic activities: an application of the multivariate threshold model. Energy Econ 27:455–476CrossRef

Jegadeesh N, Titman S (1993) Profitability of momentum strategies: an evaluation of alternative explanations. J Fin 56:699–720CrossRef

Jones C, Kaul G (1996) Oil and the stock markets. J Fin 51:463–491CrossRef

Kilian L (2008a) Exogenous oil supply shocks: how big are they and how much do they matter for the U.S. economy? Rev Econ Stat 90(2):216–240CrossRef

Kilian L (2008b) The economic effects of energy price shocks. J Econ Lit 46(4):871–1009CrossRef

Kilian L, Park C (2009) The impact of oil price shocks on the U.S. stock market. Int Econ Rev 50(4):1267–1287CrossRef

Lang L, Stulz RM (1992) Contagion and competitive intra-industry effects of bankruptcy announcements. J Financ Econ 32:45–60CrossRef

Lee K, Ni S (2002) On the dynamic effects of oil price shocks: a study using industry level data. J Monet Econ 49:823–852CrossRef

Lilien D (1982) Sectoral shifts and cyclical unemployment. J Polit Econ 90:777–794CrossRef

Loungani P (1986) Oil prices shocks and the dispersion hypothesis. Rev Econ Stat 68:536–539CrossRef

Mikkelson WH, Parch MM (1988) Withdrawn security offerings. J Financ Quant Anal 23(2):100–133CrossRef

Mohanty S, Nandha M (2011a) Oil risk exposure: the case of the U.S. oil and gas sector. Financ Rev 46:165–191CrossRef

Mohanty S, Nandha M (2011b) Oil shocks and equity returns: an empirical analysis of the US transportation sector. Rev Pac Basin Financ Mark Policies 14(1):101–128CrossRef

Mork KA (1989) Oil and the macroeconomy when prices go up and down: an extension of Hamilton’s results. J Polit Econ 97(3):740–744CrossRef

Mork K, Olsen O, Mysen H (1994) Macroeconomic responses to oil price increases and decreases in seven OECD countries. Energy J 15(4):19–36

Nandha M, Brooks R (2009) Oil prices and transport sector returns: an international analysis. Rev Quant Fin Account 33(4):393–409CrossRef

Nandha M, Faff R (2008) Does oil move equity prices? A global view. Energy Econ 30(3):986–997CrossRef

Noel M (2009) Do retail gasoline prices respond asymmetrically to cost shocks? The influence of Edgeworth cycles. RAND J Econ 40:582–595CrossRef

Park J, Ratti R (2008) Oil price shocks and stock markets in the U.S. and 13 European countries. Energy Econ 30:2587–2608CrossRef

Peltzman S (2000) Prices rise faster than they fall. J Polit Econ 108(3):466–502CrossRef

Pindyck RS (1991) The present value model of rational commodity pricing. Working papers, 3354–91. Massachusetts Institute of Technology (MIT), Sloan School of Management

Sadorsky P (1999) Oil price shocks and stock market activity. Energy Econ 21(5):449–469CrossRef

Sadorsky P (2001) Risk factors in stock returns of Canadian oil and gas companies. Energy Econ 23:17–28CrossRef

Sadorsky P (2008) Assessing the impact of oil prices on firms of different sizes: it’s tough being in the middle. Energy Policy 36:3854–3861CrossRef

Schwert G (1990) Stock returns and real activity: a century of evidence. J Fin 45:1237–1257CrossRef

Tufano P (1998) The determinants of stock price exposure: financial engineering and the gold mining industry. J Fin 53(3):1015–1052CrossRef

Whaley R (2000) The investor fear gauge. J Portfolio Manag 26:12–17CrossRef

Wu G (2001) The determinants of asymmetric volatility. Rev Financ Stud 14:837–859CrossRef

Titel: Oil and stock market activity when prices go up and down: the case of the oil and gas industry
verfasst von: Sunil K. Mohanty
Aigbe Akhigbe
Tawfeek A. Al-Khyal
Turki Bugshan
Publikationsdatum: 01.08.2013
Verlag: Springer US
Erschienen in: Review of Quantitative Finance and Accounting / Ausgabe 2/2013
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI: https://doi.org/10.1007/s11156-012-0309-9

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 2/2013

Non-audit fees, institutional monitoring, and audit quality

Managerial flexibility and the wealth effect of new product introductions

Corporate governance and market segmentation: evidence from the price difference between Chinese A and H shares

Copula-GARCH versus dynamic conditional correlation: an empirical study on VaR and ES forecasting accuracy

Controlling shareholders’ opportunistic use of share repurchases

Market implied future earnings and analysts’ forecasts