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Risk Factors and Value at Risk in Publicly Trades Companies of the Nonrenewable Energy Sector

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  • Marcelo Bianconi
  • Joe A. Yoshino

Abstract

We analyze a sample of 64 oil and gas companies of the nonrenewable energy sector from 26 countries using daily observations on return on stock from July 15, 2003 to August 14, 2012. A panel model with fixed effects and Tarch effects shows significant prices for specific risk factors including company size and debt-to-equity and significant prices for common risk factors including the U.S. Dow Jones market excess return, the Vix, the WTI price of crude oil, and the FX of the euro, Chinese yuan, Brazilian real, Japanese yen, and British pound vis-a-vis the U.S. dollar. The evidence from multivariate Garch-DCC models is that the companies have significant heterogeneity in response to specific and common factors. We show that the financial crisis of 2008 is the period of largest conditional volatility and DCC under exposure to all factors. Comparisons of one-day horizon value at risk show that Garch models without taking into account exposure underestimate value at risk. In accounting for the exposure to all factors, we find that both DCC and value at risk increase considerably during the financial crisis and remain larger in magnitude after the financial crisis of 2008.

Suggested Citation

  • Marcelo Bianconi & Joe A. Yoshino, 2013. "Risk Factors and Value at Risk in Publicly Trades Companies of the Nonrenewable Energy Sector," Discussion Papers Series, Department of Economics, Tufts University 0773, Department of Economics, Tufts University.
  • Handle: RePEc:tuf:tuftec:0773
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    3. Ben Ammar, Semir & Eling, Martin, 2015. "Common risk factors of infrastructure investments," Energy Economics, Elsevier, vol. 49(C), pages 257-273.
    4. Zhi-Fu Mi & Yi-Ming Wei & Bao-Jun Tang & Rong-Gang Cong & Hao Yu & Hong Cao & Dabo Guan, 2017. "Risk assessment of oil price from static and dynamic modelling approaches," Applied Economics, Taylor & Francis Journals, vol. 49(9), pages 929-939, February.
    5. repec:eee:eneeco:v:68:y:2017:i:c:p:228-239 is not listed on IDEAS
    6. Umar, Zaghum, 2017. "The demand of energy from an optimal portfolio choice perspective," Economic Modelling, Elsevier, vol. 61(C), pages 478-494.

    More about this item

    Keywords

    Return on stocks; price of risk; value at risk; oil and gas industry; dynamic conditional correlation (DCC);

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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