Oil subsidies and the risk exposure of oil-user stocks: Evidence from net oil producers

Alhassan Abdulrahman, Basher Syed Abul and M. Kabir Hassan

MPRA Paper from University Library of Munich, Germany

Abstract: Using a sample of 828 oil-user firms from 14 net oil-producing countries, spanning from Jan 2004 to Dec 2015, we show that stock returns of oil-user companies increase with lagged oil price returns and decrease with lagged oil price volatility. Furthermore, the evidence suggests that oil-user stocks operating in countries with larger fuel subsidies tend to be more exposed to oil returns but not oil volatility. Intuitively, when the oil price increases (decreases), oil-user stocks that operate in countries with larger oil subsidies gain (lose) more than oil-user stocks in countries with smaller fuel subsidies. However, both types of stocks experience losses when the oil market becomes more volatile, with no statistically significant difference between their losses. Our evidence implies a diversification benefit for international investors to reduce their exposure to oil risk. Our results are robust because of the use of alternative proxies, econometric methodologies, and model specifications.

Keywords: Oil price risk; Oil-producing countries; Oil subsidies; Stock performance (search for similar items in EconPapers)
JEL-codes: G1 G2 Q3 Q4 (search for similar items in EconPapers)
Date: 2019-11-23
New Economics Papers: this item is included in nep-ene, nep-ore and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Resources Policy June 2019.61(2019): pp. 461-472

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/97080/1/MPRA_paper_97080.pdf original version (application/pdf)

Related works:
Journal Article: Oil subsidies and the risk exposure of oil-user stocks: Evidence from net oil producers (2019)
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:pra:mprapa:97080

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().