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Oil price shocks and airlines stock return and volatility – A GFEVD analysis

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  • Cai, Yifei
  • Zhang, Yahua
  • Zhang, Anming

Abstract

Using the Generalized Forecast Error Variance Decomposition (GFEVD) method, this study assesses the effects of oil price shocks on both the return and volatility of aviation stocks. Specifically, we examine how different types of oil supply shocks—such as those related to oil supply, economic activity, oil consumption demand, and oil inventory—impact airline returns and volatility. Our findings indicate that fluctuations in airline returns primarily stem from economic activity shocks. However, the volatility of airlines is influenced by a range of shocks. Lastly, we offer important policy implications tailored for airline managers, market investors, and policymakers to navigate this relationship effectively.

Suggested Citation

  • Cai, Yifei & Zhang, Yahua & Zhang, Anming, 2025. "Oil price shocks and airlines stock return and volatility – A GFEVD analysis," Economics of Transportation, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:ecotra:v:41:y:2025:i:c:s2212012225000048
    DOI: 10.1016/j.ecotra.2025.100396
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    More about this item

    Keywords

    Oil price shocks; Airlines return; Airlines volatility; GFEVD;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General
    • R49 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Other

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