Oil returns and volatility: The role of mergers and acquisitions
Riza Demirer (),
Rangan Gupta () and
Aviral Tiwari ()
Energy Economics, 2018, vol. 71, issue C, 62-69
This paper provides a novel perspective to the oil-stock market nexus by examining the predictive ability of mergers and acquisitions (M&A) over West Texas Intermediate (WTI) oil returns and volatility using a nonparametric quantile-based methodology. Our findings suggest that M&A activity carries significant predictive power over oil return and volatility, while predictability displays remarkably distinct patterns across various quantiles representing normal, bull and bear market states. We also observe that M&A activity by oil firms, i.e. both the acquiring and target firms considered active in the oil and gas (O&G) industry, generally carries greater predictive power over both oil returns and volatility compared to M&A activity by non-oil acquirers, i.e. acquirers that have entered the O&G industry by buying an oil company. Our findings imply that M&A activity in the O&G industry carries valuable fundamental information regarding future expectations on oil price dynamics and should be taken into account in forecasting exercises.
Keywords: Oil returns and volatility; Mergers and acquisitions; Oil & gas industry; Nonparametric quantile causality (search for similar items in EconPapers)
JEL-codes: C22 C58 Q31 (search for similar items in EconPapers)
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Working Paper: Oil Returns and Volatility: The Role of Mergers and Acquisitions (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:71:y:2018:i:c:p:62-69
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