HOW FUEL PRICE SHOCKS AFFECT AIRLINE STOCK RETURNS: AN EMPIRICAL STUDY OF MAJOR US CARRIERS

C. Hsu Chris

The International Journal of Business and Finance Research, 2017, vol. 11, issue 2, 51-59

Abstract: This study investigated how airline stock prices respond to fuel price shocks using the asymmetric Glosten-Jagannathan-Runkle GARCH (GJR-GARCH (1,1)) model. Six airlines were selected, based on their service regions: American Airlines, Delta Air Lines, and United Airlines are larger international carriers that use various types of aircraft in their fleets and provide services in major continents, whereas Southwest Airlines, JetBlue Airways, and US Airways emphasize domestic market services and primarily use single-aisle aircraft. West Texas Intermediate Crude Oil (WTI) prices were adopted as the index of fuel prices. Based on our empirical results, a fuel price shock triggered fluctuations in airline stock returns. Moreover, American Airlines, Delta Air Lines, United, Airlines and US Airways experienced statistically significant negative relationships between their stock returns and fuel price shocks. Also, fuel price shocks significantly impacted airline stock returns during periods in which fuel prices increased but did not correlate with them during those in which such prices fell

Keywords: Fuel Shocks; GJR-GARCH; Airline Stock Return; Return Volatilities (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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