IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Oil price shocks and transportation firm asset prices

Listed author(s):
  • Aggarwal, Raj
  • Akhigbe, Aigbe
  • Mohanty, Sunil K.

The transportation sector is a major user of oil-based energy. Even as oil prices continue to fluctuate greatly, the impact of oil price changes on transportation firms has heretofore not been adequately examined. This paper fills this gap, documenting important new findings based on analysis of over two decades of daily data on large changes in oil prices (oil price shocks). First, while transportation firm returns are influenced negatively by oil price increases, risks are increased more by oil price declines. Second, firm characteristics are important with the market-to-book ratio being the most important firm characteristic, and ROA, firm size, and the prior run up in prices are also important in influencing oil price related returns, betas, variances, and trading volumes. Third, in the S&P transportation sub-sector, industry concentration is negatively related to returns, oil price risk, and trading volume, and asymmetrically related to returns and market betas. These new findings enhance our understanding of the asset price impact of oil price shocks and should be of much interest to scholars, corporate executives, money managers, regulators, and policy makers.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0140988312001004
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 5 ()
Pages: 1370-1379

as
in new window

Handle: RePEc:eee:eneeco:v:34:y:2012:i:5:p:1370-1379
DOI: 10.1016/j.eneco.2012.05.001
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
  2. Lutz Kilian & Cheolbeom Park, 2009. "The Impact Of Oil Price Shocks On The U.S. Stock Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1267-1287, November.
  3. Boyer, M. Martin & Filion, Didier, 2007. "Common and fundamental factors in stock returns of Canadian oil and gas companies," Energy Economics, Elsevier, vol. 29(3), pages 428-453, May.
  4. Faff, Robert W. & Brailsford, Timothy J., 1999. "Oil price risk and the Australian stock market," Journal of Energy Finance & Development, Elsevier, vol. 4(1), pages 69-87, 06.
  5. Giliola Frey & Matteo Manera, 2007. "Econometric Models Of Asymmetric Price Transmission," Journal of Economic Surveys, Wiley Blackwell, vol. 21(2), pages 349-415, 04.
  6. Smith, Clifford Jr. & Watts, Ross L., 1992. "The investment opportunity set and corporate financing, dividend, and compensation policies," Journal of Financial Economics, Elsevier, vol. 32(3), pages 263-292, December.
  7. Carl R. Gwin, 2009. "Asymmetric Price Adjustment: Cross-Industry Evidence," Southern Economic Journal, Southern Economic Association, vol. 76(1), pages 249-265, July.
  8. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
  9. Allayannis, George & Weston, James P, 2001. "The Use of Foreign Currency Derivatives and Firm Market Value," Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 243-276.
  10. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
  11. Driesprong, Gerben & Jacobsen, Ben & Maat, Benjamin, 2008. "Striking oil: Another puzzle?," Journal of Financial Economics, Elsevier, vol. 89(2), pages 307-327, August.
  12. Michael Noel, 2009. "Do retail gasoline prices respond asymmetrically to cost shocks? The influence of Edgeworth Cycles," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 582-595.
  13. Yanbo Jin & Philippe Jorion, 2006. "Firm Value and Hedging: Evidence from U.S. Oil and Gas Producers," Journal of Finance, American Finance Association, vol. 61(2), pages 893-919, 04.
  14. El-Sharif, Idris & Brown, Dick & Burton, Bruce & Nixon, Bill & Russell, Alex, 2005. "Evidence on the nature and extent of the relationship between oil prices and equity values in the UK," Energy Economics, Elsevier, vol. 27(6), pages 819-830, November.
  15. Knut Anton Mork, 1994. "Business Cycles and the Oil Market," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 15-38.
  16. L. Bettendorf & S. A. van der Geest & G. H. Kuper, 2009. "Do daily retail gasoline prices adjust asymmetrically?," Journal of Applied Statistics, Taylor & Francis Journals, vol. 36(4), pages 385-397.
  17. Ball, Laurence & Mankiw, N Gregory, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," Economic Journal, Royal Economic Society, vol. 104(423), pages 247-261, March.
  18. 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.
  19. Godby, Rob & Lintner, Anastasia M. & Stengos, Thanasis & Wandschneider, Bo, 2000. "Testing for asymmetric pricing in the Canadian retail gasoline market," Energy Economics, Elsevier, vol. 22(3), pages 349-368, June.
  20. Ferson, Wayne E. & Harvey, Campbell R., 1994. "Sources of risk and expected returns in global equity markets," Journal of Banking & Finance, Elsevier, vol. 18(4), pages 775-803, September.
  21. Mohan Nandha & Robert Brooks, 2009. "Oil prices and transport sector returns: an international analysis," Review of Quantitative Finance and Accounting, Springer, vol. 33(4), pages 393-409, November.
  22. Peter Tufano, 1998. "The Determinants of Stock Price Exposure: Financial Engineering and the Gold Mining Industry," Journal of Finance, American Finance Association, vol. 53(3), pages 1015-1052, 06.
  23. Hammoudeh, Shawkat & Li, Huimin, 2005. "Oil sensitivity and systematic risk in oil-sensitive stock indices," Journal of Economics and Business, Elsevier, vol. 57(1), pages 1-21.
  24. Lutz Kilian, 2008. "Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy?," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 216-240, May.
  25. Ferson, Wayne E & Harvey, Campbell R, 1991. "The Variation of Economic Risk Premiums," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 385-415, April.
  26. Donald W. Jones, Paul N. Leiby and Inja K. Paik, 2004. "Oil Price Shocks and the Macroeconomy: What Has Been Learned Since 1996," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-32.
  27. Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-744, June.
  28. Narasimhan Jegadeesh & Sheridan Titman, 1999. "Profitability of Momentum Strategies: An Evaluation of Alternative Explanations," NBER Working Papers 7159, National Bureau of Economic Research, Inc.
  29. Haugen, Robert A. & Baker, Nardin L., 1996. "Commonality in the determinants of expected stock returns," Journal of Financial Economics, Elsevier, vol. 41(3), pages 401-439, July.
  30. Larsson, Karl & Nossman, Marcus, 2011. "Jumps and stochastic volatility in oil prices: Time series evidence," Energy Economics, Elsevier, vol. 33(3), pages 504-514, May.
  31. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
  32. Sunil K. Mohanty & Mohan Nandha, 2011. "Oil Risk Exposure: The Case of the U.S. Oil and Gas Sector," The Financial Review, Eastern Finance Association, vol. 46(1), pages 165-191, 02.
  33. Sadorsky, Perry, 2001. "Risk factors in stock returns of Canadian oil and gas companies," Energy Economics, Elsevier, vol. 23(1), pages 17-28, January.
  34. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
  35. Hamilton, James D., 1988. "Are the macroeconomic effects of oil-price changes symmetric? : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 28(1), pages 369-378, January.
  36. Kewei Hou & David T. Robinson, 2006. "Industry Concentration and Average Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1927-1956, 08.
  37. Bhandari, Laxmi Chand, 1988. " Debt/Equity Ratio and Expected Common Stock Returns: Empirical Evidence," Journal of Finance, American Finance Association, vol. 43(2), pages 507-528, June.
  38. Huang, Bwo-Nung & Hwang, M.J. & Peng, Hsiao-Ping, 2005. "The asymmetry of the impact of oil price shocks on economic activities: An application of the multivariate threshold model," Energy Economics, Elsevier, vol. 27(3), pages 455-476, May.
  39. Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 305-339.
  40. Pindyck, Robert S, 1993. "The Present Value Model of Rational Commodity Pricing," Economic Journal, Royal Economic Society, vol. 103(418), pages 511-530, May.
  41. Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 98(1), pages 85-106.
  42. Mikkelson, Wayne H. & Partch, M. Megan, 1988. "Withdrawn Security Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(02), pages 119-133, June.
  43. Nandha, Mohan & Faff, Robert, 2008. "Does oil move equity prices? A global view," Energy Economics, Elsevier, vol. 30(3), pages 986-997, May.
  44. 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.
  45. Sadorsky, Perry, 1999. "Oil price shocks and stock market activity," Energy Economics, Elsevier, vol. 21(5), pages 449-469, October.
  46. He, Yanan & Wang, Shouyang & Lai, Kin Keung, 2010. "Global economic activity and crude oil prices: A cointegration analysis," Energy Economics, Elsevier, vol. 32(4), pages 868-876, July.
  47. Jones, Charles M & Kaul, Gautam, 1996. " Oil and the Stock Markets," Journal of Finance, American Finance Association, vol. 51(2), pages 463-491, June.
  48. Sridhar Gogineni, 2010. "Oil and the Stock Market: An Industry Level Analysis," The Financial Review, Eastern Finance Association, vol. 45(4), pages 995-1010, November.
  49. Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, vol. 9(1), pages 3-18, March.
  50. Lee, Kiseok & Ni, Shawn, 2002. "On the dynamic effects of oil price shocks: a study using industry level data," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 823-852, May.
  51. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:34:y:2012:i:5:p:1370-1379. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.