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Oil and Cars: The Impact of Crude Oil Prices on the Stock Returns of Automotive Companies

Author

Listed:
  • Bettina Lis

    (Gutenberg University of Mainz, Institute of Media Studies and Communication, Mainz, Germany)

  • Christian Neßler

    (Gutenberg University of Mainz, School of Management and Economics, Mainz, Germany)

  • Jan Retzmann

    (Gutenberg University of Mainz, School of Management and Economics, Mainz, Germany)

Abstract

In this paper we are testing whether the impact of oil prices is different on the overall market and automotive companies. In addition we investigate, if this relationship is nonlinear. For this we use stock return data of US, German and Japanese car companies, and returns of share indices from the same countries as control variables, and Brent crude oil price changes. We first estimate the impact of crude oil on the indices, then clean the indices from these influences, and afterwards estimate the impact on the stocks. For this we are using OLS and EGARCH (1,1). We conclude that in general the car companies‘ stocks do not react more adversely as the overall market to crude oil price increases, while Japanese companies do not show any excess sensitivity at all. German companies tend to be sensitive, and US and German companies are together more sensitive in the more recent time periods.

Suggested Citation

  • Bettina Lis & Christian Neßler & Jan Retzmann, 2012. "Oil and Cars: The Impact of Crude Oil Prices on the Stock Returns of Automotive Companies," International Journal of Economics and Financial Issues, Econjournals, vol. 2(2), pages 190-200.
  • Handle: RePEc:eco:journ1:2012-02-7
    as

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    References listed on IDEAS

    as
    1. Bernd Hayo & Ali M. Kutan, 2005. "The impact of news, oil prices, and global market developments on Russian financial markets," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(2), pages 373-393, April.
    2. Bansal, Ravi & Viswanathan, S, 1993. " No Arbitrage and Arbitrage Pricing: A New Approach," Journal of Finance, American Finance Association, vol. 48(4), pages 1231-1262, September.
    3. Keith Sill, 2007. "The macroeconomics of oil shocks," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 21-31.
    4. Hiemstra Craig & Kramer Charles, 1997. "Nonlinearity and Endogeneity in Macro-Asset Pricing," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 2(3), pages 1-18, October.
    5. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
    6. James D. Hamilton, 1985. "Historical Causes of Postwar Oil Shocks and Recessions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 97-116.
    7. Jones, Charles M & Kaul, Gautam, 1996. " Oil and the Stock Markets," Journal of Finance, American Finance Association, vol. 51(2), pages 463-491, June.
    8. Roger D. Huang & Ronald W. Masulis & Hans R. Stoll, 1996. "Energy shocks and financial markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(1), pages 1-27, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Crude oil; Automotive; Car producers; Stock returns; Regression; Nonlinear;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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