Risk Factors and Value at Risk in Publicly Trades Companies of the Nonrenewable Energy Sector

Marcelo Bianconi and Joe Yoshino

No 773, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: We analyze a sample of 64 oil and gas companies of the nonrenewable energy sector from 26 countries using daily observations on return on stock from July 15, 2003 to August 14, 2012. A panel model with fixed effects and Tarch effects shows significant prices for specific risk factors including company size and debt-to-equity and significant prices for common risk factors including the U.S. Dow Jones market excess return, the Vix, the WTI price of crude oil, and the FX of the euro, Chinese yuan, Brazilian real, Japanese yen, and British pound vis-a-vis the U.S. dollar. The evidence from multivariate Garch-DCC models is that the companies have significant heterogeneity in response to specific and common factors. We show that the financial crisis of 2008 is the period of largest conditional volatility and DCC under exposure to all factors. Comparisons of one-day horizon value at risk show that Garch models without taking into account exposure underestimate value at risk. In accounting for the exposure to all factors, we find that both DCC and value at risk increase considerably during the financial crisis and remain larger in magnitude after the financial crisis of 2008.

Keywords: Return on stocks; price of risk; value at risk; oil and gas industry; dynamic conditional correlation (DCC) (search for similar items in EconPapers)
JEL-codes: C3 G12 L72 Q3 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ene and nep-rmg
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Journal Article: Risk factors and value at risk in publicly traded companies of the nonrenewable energy sector (2014)
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