Oil subsidies and the risk exposure of oil-user stocks: Evidence from net oil producers

Abdulrahman Alhassan, Syed Abul Basher and M. Kabir Hassan

Resources Policy, 2019, vol. 61, issue C, 461-472

Abstract: Using a sample of 828 oil-user firms from 14 net oil-producing countries spanning from January 2004 to December 2015, we show that stock returns of oil-user companies increase with lagged oil price returns and decrease with lagged oil price volatility. Furthermore, the evidence suggests that oil-user stocks operating in countries with larger fuel subsidies tend to be more exposed to oil returns but not oil volatility. Intuitively, when the oil price increases (decreases), oil-user stocks that operate in countries with larger oil subsidies gain (lose) more than oil-user stocks in countries with smaller fuel subsidies. However, both types of stocks experience losses when the oil market becomes more volatile, with no statistically significant difference between their losses. Our evidence implies a diversification benefit for international investors to reduce their exposure to oil risk. Our results are robust because of the use of alternative proxies, econometric methodologies, and model specifications.

Keywords: G1; G2; Q3; Q4; Oil price risk; Oil-producing countries; Oil subsidies; Stock performance (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Oil subsidies and the risk exposure of oil-user stocks: Evidence from net oil producers (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:61:y:2019:i:c:p:461-472

DOI: 10.1016/j.resourpol.2018.04.003

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