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Oil price shocks and transportation firm asset prices

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  • Aggarwal, Raj
  • Akhigbe, Aigbe
  • Mohanty, Sunil K.

Abstract

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.

Suggested Citation

  • Aggarwal, Raj & Akhigbe, Aigbe & Mohanty, Sunil K., 2012. "Oil price shocks and transportation firm asset prices," Energy Economics, Elsevier, vol. 34(5), pages 1370-1379.
  • Handle: RePEc:eee:eneeco:v:34:y:2012:i:5:p:1370-1379
    DOI: 10.1016/j.eneco.2012.05.001
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    Cited by:

    1. Kristjanpoller, Werner D. & Concha, Diego, 2016. "Impact of fuel price fluctuations on airline stock returns," Applied Energy, Elsevier, vol. 178(C), pages 496-504.
    2. repec:eco:journ1:2017-04-51 is not listed on IDEAS
    3. Ben Ammar, Semir & Eling, Martin, 2015. "Common risk factors of infrastructure investments," Energy Economics, Elsevier, vol. 49(C), pages 257-273.
    4. Gaye GENCER & Sercan DEMIRALAY, 2013. "The impact of oil prices on sectoral returns: an empirical analysis from Borsa Istanbul," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(12(589)), pages 7-24, December.
    5. repec:spr:empeco:v:53:y:2017:i:3:d:10.1007_s00181-016-1166-5 is not listed on IDEAS
    6. Shaeri, Komeil & Adaoglu, Cahit & Katircioglu, Salih T., 2016. "Oil price risk exposure: A comparison of financial and non-financial subsectors," Energy, Elsevier, vol. 109(C), pages 712-723.
    7. Mohanty, Sunil & Nandha, Mohan & Habis, Essam & Juhabi, Eid, 2014. "Oil price risk exposure: The case of the U.S. Travel and Leisure Industry," Energy Economics, Elsevier, vol. 41(C), pages 117-124.
    8. Asche, Frank & Dahl, Roy Endre & Oglend, Atle, 2013. "Value-at-Risk: Risk assessment for the portfolio of oil and gas producers," UiS Working Papers in Economics and Finance 2013/3, University of Stavanger.
    9. Alaali, Fatema, 2017. "Analysing the Effect of Oil Price Shocks on Asset Prices: evidence from UK firms," MPRA Paper 78013, University Library of Munich, Germany.

    More about this item

    Keywords

    Oil shocks; Stock returns; Transportation industry;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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