Economic uncertainty, oil prices, hedging and U.S. stock returns of the airline industry

Wensheng Kang, Fernando Pérez de Gracia () and Ronald Ratti

The North American Journal of Economics and Finance, 2021, vol. 57, issue C

Abstract: This paper examines the impacts of economic policy uncertainty and oil price shocks on stock returns of U.S. airlines using both industry and firm-level data. Our empirical approach considers a structural vector-autoregressive model with variables recognized to be important for airline returns including jet fuel price volatility. Empirical results confirm that oil price increase, economic uncertainty and jet fuel price volatility have significantly adverse effect on real stock returns of airlines both at industry and at firm level. In addition, we also find that hedging future fuel purchase has statistically positive impact on the smaller airlines. Our results suggest policy implications for practitioners, managers of airline industry and commodity investors.

Keywords: And phrases: Crude oil prices; Volatility of jet fuel prices; Uncertainty; Stock returns, Airline companies; SVAR (search for similar items in EconPapers)
JEL-codes: E44 G12 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:57:y:2021:i:c:s1062940821000255

DOI: 10.1016/j.najef.2021.101388

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