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US Oil Price Exposure: The Industry Effects

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  • Don Bredin

    (University College Dublin)

  • John Elder

    (Colorado State University)

Abstract

This paper investigates the exposure of industry level portfolios to oil price shocks. Our paper utilizes the Campbell (1991) decomposition of stock returns based on a log-linear approximation to the discounted present value relation while allowing for time varying expected returns. The results from our baseline regressions indicate that there is little sensitivity in industry level portfolios to unexpected movements in oil prices, with the gold, oil & gas and retail industries being the only exception. In contrast, based in the Campbell (1991) decomposition, we identify extensive exposure to oil prices in industry level returns in particular channels. The extent of the exposure is particularly significant for a number of the industries, with positive (negative) permanent implications for gold, and the oil and gas industries (retail and meals, restaurants and hotels).

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File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201107.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 201107.

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Length: 20 pages
Date of creation: 11 Mar 2011
Date of revision:
Handle: RePEc:ucd:wpaper:201107

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Keywords: Oil; Industry Stock Returns; Vector autoregression;

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