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

Sunil Mohanty (), Aigbe Akhigbe, Tawfeek Al-Khyal and Turki Bugshan

Review of Quantitative Finance and Accounting, 2013, vol. 41, issue 2, 253-272

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. Copyright Springer Science+Business Media, LLC 2013

Keywords: Oil shocks; Stock returns; Oil and gas industry; G10; C32 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (29)

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DOI: 10.1007/s11156-012-0309-9

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