Comparative response of global energy firm stocks to uncertainties from the crude oil market, stock market, and economic policy

Oluwasegun Adekoya (), Johnson A. Oliyide, Oluwademilade T. Kenku and Mamdouh Abdulaziz Sa Al-Faryan

Resources Policy, 2022, vol. 79, issue C

Abstract: In this study, a comparative analysis of the impacts of uncertainties induced by government economic policy and the crude oil and stock markets on the stock returns of 62 energy firms is carried out across different market states. We find that economic policy uncertainty (EPU) has a stronger influence than the two market-based uncertainties. However, the oil market uncertainty (OVX) outperforms the general stock market uncertainty (VIX) for the causality-in-mean, but the reverse holds for the causality-in-variance. Stronger causal impacts are also observed during the normal and bearish market states, in that order. Finally, more significant connection is attributed to the causality-in-mean than the causality-in-variance. Thus, uncertainties, especially the one induced by the economic policy, should not be jettisoned in modeling and forecasting stock returns. The regime-switching regression model also supports the role of uncertainties in predicting the stock returns of the energy firms, with particular emphasis on adverse impact in most regimes. The fact that causality is stronger at the middle and lower quantiles also suggests the poor risk-hedging power of the stocks at the normal and bearish market states.

Keywords: Uncertainty; Stock returns; Energy firms; Market states (search for similar items in EconPapers)
JEL-codes: G11 G15 (search for similar items in EconPapers)
Date: 2022
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:jrpoli:v:79:y:2022:i:c:s0301420722004470

DOI: 10.1016/j.resourpol.2022.103004

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