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Risk factors in oil and gas industry returns: International evidence

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  • Ramos, Sofia B.
  • Veiga, Helena

Abstract

The recent boom in oil prices has attracted many investors to oil companies in search of both returns and diversification benefits. This analysis of the risk factors of investing in the oil and gas industry in 34 countries finds evidence that oil price is a globally priced factor for the oil industry. The oil and gas sector in developed countries responds more strongly to oil price changes than in emerging markets. Oil and gas industry returns also respond asymmetrically to changes in oil prices; oil price rises have a greater impact than oil price drops. There is no parallel to the asymmetry of oil price changes in other industries related to commodities. If there is any asymmetry, it is in the opposite direction from oil. Negative commodity price changes have a greater impact than positive ones. The results seem to indicate that the oil and gas industry is distinguished by a pass-through effect.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 3 (May)
Pages: 525-542

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:3:p:525-542

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Web page: http://www.elsevier.com/locate/eneco

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Keywords: Asymmetric effects Commodity price risk Multifactor asset pricing models Net oil prices Oil industry Panel data Scaled oil prices;

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Citations

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Cited by:
  1. Ramos, Sofia B. & Veiga, Helena, 2013. "Oil price asymmetric effects: Answering the puzzle in international stock markets," Energy Economics, Elsevier, vol. 38(C), pages 136-145.
  2. Sofía B. Ramos & Helena Veiga & Pedro Latoeiro, 2013. "Predictability of stock market activity using Google search queries," Statistics and Econometrics Working Papers ws130605, Universidad Carlos III, Departamento de Estadística y Econometría.
  3. Moya-Martínez, Pablo & Ferrer-Lapeña, Román & Escribano-Sotos, Francisco, 2014. "Oil price risk in the Spanish stock market: An industry perspective," Economic Modelling, Elsevier, vol. 37(C), pages 280-290.
  4. Misund, Bard & Mohn, Klaus, 2014. "Exploration Risk in Oil & Gas Shareholder Returns," UiS Working Papers in Economics and Finance 2014/4, University of Stavanger.
  5. Marcelo Bianconi & Joe A. Yoshino, 2013. "Risk Factors and Value at Risk in Publicly Trades Companies of the Nonrenewable Energy Sector," Discussion Papers Series, Department of Economics, Tufts University 0773, Department of Economics, Tufts University.
  6. Aloui, Chaker & Nguyen, Duc Khuong & Njeh, Hassen, 2012. "Assessing the impacts of oil price fluctuations on stock returns in emerging markets," Economic Modelling, Elsevier, vol. 29(6), pages 2686-2695.
  7. Ratti, Ronald A. & Hasan, M. Zahid, 2013. "Oil Price Shocks and Volatility in Australian Stock Returns ‎," MPRA Paper 49043, University Library of Munich, Germany.
  8. Sofía B. Ramos & Helena Veiga & Chih-Wei Wang, 2012. "Asymmetric long-run effects in the oil industry," Statistics and Econometrics Working Papers ws120502, Universidad Carlos III, Departamento de Estadística y Econometría.

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