Evidence of Energy-Related Uncertainties and Changes in Oil Prices on U.S. Sectoral Stock Markets

Fu-Lai Lin (), Thomas C. Chiang and Yu-Fen Chen
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Fu-Lai Lin: Department of Finance, Da-Yeh University, 168 University Rd., Dacun, Changhua 51591, Taiwan
Thomas C. Chiang: Department of Finance, Drexel University, 3141 Chestnut Street, Philadelphia, PA 19104, USA
Yu-Fen Chen: Department of Finance, Da-Yeh University, 168 University Rd., Dacun, Changhua 51591, Taiwan

Mathematics, 2025, vol. 13, issue 11, 1-26

Abstract: This study examines the relationship between stock prices, energy prices, and climate policy uncertainty using 11 sectoral stocks in the U.S. market. The evidence confirms that rising prices of energy commodities positively affect not only the energy and oil sector stocks but also create spillover effects across other sectors. Notably, all sectoral stocks, except Real Estate sector, show resilience to increases in crude oil and gasoline, suggesting potential hedging benefits. In addition, the findings reveal that sectoral stock returns are generally negatively affected by several types of uncertainty, including climate policy uncertainty, economic policy uncertainty, oil price uncertainty, as well as energy and environmental regulation-induced equity market volatility and the energy uncertainty index. These adverse effects are present across sectors, with few exceptions. The evidence reveals that the feedback effect between changes in climate policy uncertainty and changes in oil prices has an adverse impact on stock returns. Omitting these uncertainty factors from analyses could lead to biased estimates in the relationship between stock prices and energy prices.

Keywords: uncertainty hypothesis; energy uncertainties; sectoral stock returns; climate policy uncertainty; oil prices (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2025
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