Does oil price volatility matter for the US transportation industry?

Anupam Dutta, Elie Bouri, Timo Rothovius, Nehme Azoury and Gazi Uddin

Energy, 2024, vol. 290, issue C

Abstract: Although the US transport sector is one of the major users of fossil fuel (e.g., crude oil), the impact of energy price volatility on transport stock sector indexes remains under-researched. The present study addresses this research void by investigating the impact of energy implied volatility on transportation stock returns in the US. Using the crude oil volatility index (OVX), as a proxy of energy price volatility, and three Dow Jones indexes tracking the performance of the airlines, marine and trucking stock subsectors, we employ a GARCH-jump model. The main results show that the oil market sends volatility to the US transport subsector stock indexes, suggesting that oil implied volatility plays a role in pricing US transport stocks. The impact of OVX shocks is asymmetric, indicating that increases and decreases in oil implied volatility have a heterogeneous impact on the transport subsector stock markets. Jumps are significant in the three transport subsector stock indexes, and are time-dependent. Notably, the three transportation subsector stock indexes are more sensitive to OVX shocks than the S&P 500 index. These results have important implications for investors, policymakers, academics, and managers of the US transportation industry.

Keywords: US transport sector returns; Oil implied volatility (OVX); COVID-19 outbreak; GARCH-Jump; Asymmetric effect (search for similar items in EconPapers)
JEL-codes: C50 G10 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:290:y:2024:i:c:s0360544223035880

DOI: 10.1016/j.energy.2023.130194

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