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Assessing the impact of oil prices on firms of different sizes: Its tough being in the middle

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  • Sadorsky, Perry

Abstract

Recent empirical research has found evidence of a relationship between oil price movements and stock prices. Most published research investigates the relationship between oil price movements and stock prices using either economy-wide measures of stock prices or industry sector measures of stock prices. An important question that has largely gone unanswered relates to the relationship between oil prices and stock prices when the size of firms is allowed to vary. Relative to large firms, do oil price movements have larger or smaller impacts on the stock prices of small- or medium-sized firms? The answer to this question could have important policy implications that affect economic growth and prosperity. In this paper, a panel of firms is followed over a 17-year period to investigate the relationship between oil price movements, firm size, and stock prices. Evidence is found that shows the relationship between oil price movements and stock prices does vary with firm size and the relationship is strongest for medium-sized firms.

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  • Sadorsky, Perry, 2008. "Assessing the impact of oil prices on firms of different sizes: Its tough being in the middle," Energy Policy, Elsevier, vol. 36(10), pages 3854-3861, October.
    • Handle: RePEc:eee:enepol:v:36:y:2008:i:10:p:3854-3861
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    Cited by:

    1. Khan, Salman, 2010. "Crude Oil Price shocks to Emerging Markets: Evaluating the BRICs Case," MPRA Paper 22978, University Library of Munich, Germany.
    2. repec:spr:empeco:v:53:y:2017:i:3:d:10.1007_s00181-016-1166-5 is not listed on IDEAS
    3. Chang, Chia-Lin & McAleer, Michael & Tansuchat, Roengchai, 2013. "Conditional correlations and volatility spillovers between crude oil and stock index returns," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 116-138.
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    5. Mohamed Amine BOUTABA, "undated". "Does Carbon Affect European Oil Companies' Equity Values?," EcoMod2009 21500018, EcoMod.
    6. Lee, Yen-Hsien & Chiou, Jer-Shiou, 2011. "Oil sensitivity and its asymmetric impact on the stock market," Energy, Elsevier, vol. 36(1), pages 168-174.
    7. Rania Jammazi & Duc Khuong Nguyen, 2015. "Responses of international stock markets to oil price surges: a regime-switching perspective," Applied Economics, Taylor & Francis Journals, vol. 47(41), pages 4408-4422, September.
    8. Phan, Dinh Hoang Bach & Sharma, Susan Sunila & Narayan, Paresh Kumar, 2015. "Oil price and stock returns of consumers and producers of crude oil," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 245-262.
    9. Wang, Yong & Xiang, Erwei & Cheung, Adrian (Wai Kong) & Ruan, Wenjuan & Hu, Wei, 2017. "International oil price uncertainty and corporate investment: Evidence from China's emerging and transition economy," Energy Economics, Elsevier, vol. 61(C), pages 330-339.
    10. Emmanuel Anoruo, 2011. "Testing for Linear and Nonlinear Causality between Crude Oil Price Changes and Stock Market Returns," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 4(3), pages 75-92, December.
    11. Ratti, Ronald A. & Seol, Youn & Yoon, Kyung Hwan, 2011. "Relative energy price and investment by European firms," Energy Economics, Elsevier, vol. 33(5), pages 721-731, September.
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    13. Henriques, Irene & Sadorsky, Perry, 2010. "Can environmental sustainability be used to manage energy price risk?," Energy Economics, Elsevier, vol. 32(5), pages 1131-1138, September.
    14. Scholtens, Bert & Wagenaar, Robert, 2011. "Revisions of international firms’ energy reserves and the reaction of the stock market," Energy, Elsevier, vol. 36(5), pages 3541-3546.
    15. repec:ipg:wpaper:2014-080 is not listed on IDEAS
    16. Sadorsky, Perry, 2012. "Modeling renewable energy company risk," Energy Policy, Elsevier, vol. 40(C), pages 39-48.
    17. Ramos, Sofia B. & Veiga, Helena, 2011. "Risk factors in oil and gas industry returns: International evidence," Energy Economics, Elsevier, vol. 33(3), pages 525-542, May.
    18. Tsai, Chun-Li, 2015. "How do U.S. stock returns respond differently to oil price shocks pre-crisis, within the financial crisis, and post-crisis?," Energy Economics, Elsevier, vol. 50(C), pages 47-62.
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    20. repec:eee:ememar:v:31:y:2017:i:c:p:193-208 is not listed on IDEAS
    21. repec:eco:journ1:2017-04-51 is not listed on IDEAS
    22. Henriques, Irene & Sadorsky, Perry, 2011. "The effect of oil price volatility on strategic investment," Energy Economics, Elsevier, vol. 33(1), pages 79-87, January.
    23. repec:ipg:wpaper:2014-085 is not listed on IDEAS
    24. Chiou, Jer-Shiou & Lee, Yen-Hsien, 2009. "Jump dynamics and volatility: Oil and the stock markets," Energy, Elsevier, vol. 34(6), pages 788-796.
    25. 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.

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