Impact of oil price change on airline's stock price and volatility: Evidence from China and South Korea
Xiao Yun and
Seong-Min Yoon ()
Energy Economics, 2019, vol. 78, issue C, 668-679
Generally, the influence of crude oil price on the industries (enterprises) varies because they have different levels of reliance on crude oil. For airlines, the expenditure on fuel accounts for a considerable proportion of their gross costs; thus, airlines are unusually sensitive to changes in the crude oil price. The discussion on the relationship between crude oil price and airlines will help the airlines improve their ability to cope with the crude oil price risk. In addition, the responses of South Korean and Chinese airlines in the event of a price shock, that take, are also very important as the airplane is a basic form of transportation in many countries. This study investigates the impact of three crude oil price (WTI, Brent, Dubai) change on the stock price and volatility of four airlines (Korean Air, Asiana Airlines, Air China, and China Eastern Airlines) using VAR-GARCH-BEKK model. The main findings are as follows. There is return and volatility spillover effect between crude oil price and the stock prices of airlines. The volatility spillover effect between the crude oil price and airlines' stock price is more significant than the return spillover effect. Compared with the transportation industry, the stock prices of smaller airlines of South Korea and China are relatively more sensitive to the change in oil price. In addition, compared with Korea's airlines, China's airlines are influenced more by the oil price change, implying that spillover effects owing to oil price are closely related to the different characteristics of the air transport markets of the two countries.
Keywords: Crude oil price; Airlines; Transport; Return and volatility spillover effect; VAR-GARCH-BEKK (search for similar items in EconPapers)
JEL-codes: C58 F37 G15 Q43 R40 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:78:y:2019:i:c:p:668-679
Access Statistics for this article
Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant
More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().