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Oil Price Shocks and the Hedging Benefit of Airline Investments

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  • Jochen Güntnher
  • Peter Öhlinger

    (Department of Economics, Johannes Kepler University Linz)

Abstract

In the light of finite oil reserves, Persian Gulf oil-exporting economies have recently undertaken major investments in their domestic travel and tourism industries. Building on the Bayesian SVAR model of the global oil market in Baumeister and Hamilton (2019), we investigate the conditional comovement of airline stock returns with real oil prices in response to structural oil supply and demand shocks. We find that investing in the Datastream World Airline Index offers a hedging benefit conditional on oil supply, consumption demand, and inventory demand shocks, whereas there is no evidence of systematic positive or negative comovement following shocks to world economic activity and airline stock returns.

Suggested Citation

  • Jochen Güntnher & Peter Öhlinger, 2021. "Oil Price Shocks and the Hedging Benefit of Airline Investments," Economics working papers 2021-14, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2021-14
    Note: English
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    1. Arampatzidis, Ioannis & Panagiotidis, Theodore, 2023. "On the identification of the oil-stock market relationship," Economic Modelling, Elsevier, vol. 120(C).

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    More about this item

    Keywords

    Airline excess returns; Bayesian SVAR model; Hedging; Oil price shocks;
    All these keywords.

    JEL classification:

    • 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
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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