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Nonrenewable Energy Prices and Stock Prices of EU Financial Companies: A Short Versus Long-Term Analysis

In: Business Revolution in a Digital Era

Author

Listed:
  • Alexandra Horobet

    (Bucharest University of Economic Studies)

  • Georgiana Vrinceanu

    (Bucharest University of Economic Studies)

  • Consuela Popescu

    (Bucharest University of Economic Studies)

  • Lucian Belascu

    (Lucian Blaga” University of Sibiu)

Abstract

This paper investigates the relationship between financial companies’ stock prices and nonrenewable energy sources prices (crude oil and coal price) using a sample of major financial companies headquartered in the EU. The link between stock prices and nonrenewable energy sources prices risk is modeled using a set of macroeconomic variables, such as Brent crude oil price, coal price, local stock market indices, the EUR/USD exchange rate, long-term interest rates and a global volatility measure (VIX). We apply panel data as the base econometric model and an ARDL extension that sheds light on the long versus short-run exposure of EU financial companies to nonrenewable energy prices volatility. Our results show that the EU financial sector is pervasively exposed to the nonrenewable energy sources price fluctuations over the long-run and this exposure represents a component of financial companies’ exposure to real economy risk factors. At the same time, the short-term exposure is specific to financial companies and highlights a different behavior of market investors compared to the long-run valuation of financial companies’ stock prices. These results point towards the fundamental role of the financial sector in the EU economy in transmitting systemic shocks, which raises serious challenges for the EU financial authorities.

Suggested Citation

  • Alexandra Horobet & Georgiana Vrinceanu & Consuela Popescu & Lucian Belascu, 2021. "Nonrenewable Energy Prices and Stock Prices of EU Financial Companies: A Short Versus Long-Term Analysis," Springer Proceedings in Business and Economics, in: Alina Mihaela Dima & Fabrizio D'Ascenzo (ed.), Business Revolution in a Digital Era, pages 55-70, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-59972-0_5
    DOI: 10.1007/978-3-030-59972-0_5
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    Keywords

    Oil prices; Coal prices; ARDL;
    All these keywords.

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