Oil Price Risk Exposure and the Cross-section of Stock Returns: The Case of Net Exporting Countries

Riza Demirer, Shrikant Jategaonka and Ahmed Khalifa

No 858, Working Papers from Economic Research Forum

Abstract: The main goal of this paper is to examine whether oil price risk is systematically priced in the cross-section of stock returns in net oil-exporting countries even after controlling for market and firm-level risk factors. Using firm-level data from the Gulf Arab stock markets, we find that stocks that are more sensitive to oil price changes indeed yield significantly higher returns, suggesting that oil price exposure can serve as a return predictor in these stock markets. However, we also find that it is the absolute exposure of a stock that drives returns, suggesting fluctuations in the oil price as a source of stock return premia in these markets. Our tests further suggest that a portfolio strategy based on a stock’s absolute exposure to oil price risk yields significant positive subsequent returns as well, suggesting an investment strategy based on the absolute oil price risk exposure of stocks in net exporting nations.

Pages: 24
Date: 2014-11, Revised 2014-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published by The Economic Research Forum (ERF)

Downloads: (external link)
http://erf.org.eg/wp-content/uploads/2015/12/858.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://erf.org.eg/wp-content/uploads/2015/12/858.pdf [301 Moved Permanently]--> https://erf.org.eg/wp-content/uploads/2015/12/858.pdf)
http://bit.ly/2mWfWUB (text/html)

Related works:
Journal Article: Oil price risk exposure and the cross-section of stock returns: The case of net exporting countries (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:erg:wpaper:858

Access Statistics for this paper

More papers in Working Papers from Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Namees Nabeel ().