The oil industry's response to new avenues in futures trading
Kenneth Hunsader and
Applied Financial Economics, 2011, vol. 21, issue 6, 401-413
We examine the Cumulative Abnormal Returns (CARs) of petroleum, airline and investment banking firms to the announcement and initiation of trading for two new oil-related assets in 2006: West Texas Intermediate crude futures contracts traded via the Intercontinental Exchange and the American Stock Exchange's (AMEX) US Oil exchange traded fund (USO). In general, we find few significant changes, but the changes we find are marginally positive reactions related to the two new contracts. We also find evidence that firms which utilize derivatives benefit less than firms which do not. However, firms which trade derivatives (nonhedgers) have greater returns than nontraders (hedgers).
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