Do Oil and Gas Risk Factors Matter in the Malaysian Oil and Gas Industry? A Fama-MacBeth Two Stage Panel Regression Approach

Mohmmad Enamul Hoque, Soo Wah Low and Mohd Azlan Shah Zaidi
Additional contact information
Mohmmad Enamul Hoque: Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia
Soo Wah Low: Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia
Mohd Azlan Shah Zaidi: Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia

Energies, 2020, vol. 13, issue 5, 1-15

Abstract: This study examines whether oil and gas risk factors are priced in the returns of Malaysian oil and gas stocks employing asset pricing model with improved version of Fama-MacBeth two-stage panel regression. The findings reveal that oil price risk, gas price risk, and exchange rate risk are priced factors in the returns of oil and gas stocks, alongside market-based risk factors. Oil price, gas price and exchange rate factors are found to be associated with positive risk premium implying that they are systematic risk factors in the Malaysian oil and gas industry. Investors demand compensation for exposure to changes in oil price, gas price and exchange rate, implying that the risk cannot be eliminated through diversification. The risk premium for common systematic risk factors such as market, book-to-market, and momentum factors are found to be negative. The results suggest that in the Malaysian oil and gas industry, momentum driven strategy produces negative returns and investors receive higher returns from investing in growth oriented oil and gas stocks. Our results offer implications for asset pricing and portfolio management.

Keywords: Fama-MacBeth two-stage panel regression; systematic risk; oil and gas industry; asset pricing (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.mdpi.com/1996-1073/13/5/1154/pdf (application/pdf)
https://www.mdpi.com/1996-1073/13/5/1154/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jeners:v:13:y:2020:i:5:p:1154-:d:328131

Access Statistics for this article

Energies is currently edited by Ms. Agatha Cao

More articles in Energies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().