Crude oil moments and PNG stock returns

Arjun Chatrath, Hong Miao and Sanjay Ramchander

Energy Economics, 2014, vol. 44, issue C, 222-235

Abstract: We examine the risk-neutral moments of crude oil and their relationship to stock returns in the Petroleum and Natural Gas (PNG) industry. We find substantial overlaps in the association between returns and S&P 500- and crude oil higher moments. Net of these overlaps, PNG stocks share a significant negative relationship with crude volatility and positive relationships with crude skewness and kurtosis. Large cap stocks and those with a history of hedging exhibit negative loadings on crude volatility. However, after controlling for S&P 500- and crude oil returns and their risk-neutral moments, there is little evidence that PNG stocks systematically and significantly price either S&P 500- or crude oil volatility. We document a weak pricing of crude skewness, but find no evidence for the pricing of the implied higher moments of market returns.

Keywords: Risk neutral moments; Crude oil; Petroleum and natural gas; Stock returns (search for similar items in EconPapers)
JEL-codes: G13 G14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:44:y:2014:i:c:p:222-235

DOI: 10.1016/j.eneco.2014.04.010

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