Oil price shocks and airlines stock return and volatility – A GFEVD analysis

Yifei Cai, Yahua Zhang and Anming Zhang

Economics of Transportation, 2025, vol. 41, issue C

Abstract: Using the Generalized Forecast Error Variance Decomposition (GFEVD) method, this study assesses the effects of oil price shocks on both the return and volatility of aviation stocks. Specifically, we examine how different types of oil supply shocks—such as those related to oil supply, economic activity, oil consumption demand, and oil inventory—impact airline returns and volatility. Our findings indicate that fluctuations in airline returns primarily stem from economic activity shocks. However, the volatility of airlines is influenced by a range of shocks. Lastly, we offer important policy implications tailored for airline managers, market investors, and policymakers to navigate this relationship effectively.

Keywords: Oil price shocks; Airlines return; Airlines volatility; GFEVD (search for similar items in EconPapers)
JEL-codes: G10 G12 R40 R49 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecotra:v:41:y:2025:i:c:s2212012225000048

DOI: 10.1016/j.ecotra.2025.100396

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