Oil Price Risk Exposure and the Cross-Section of Stock Returns PDF Download
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Author: Riza Demirer
Publisher:
ISBN:
Category :
Languages : en
Pages : 37
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Book Description
The main goal of this paper is to examine whether oil price risk is systematically priced in the cross-section of stock returns in net oil-exporting countries even after controlling for market and firm-level risk factors. Using firm-level data from the Gulf Arab stock markets, we find that stocks that are more sensitive to oil price changes indeed yield significantly higher returns, suggesting that oil price exposure can serve as a return predictor in these stock markets. However, we also find that it is the absolute exposure of a stock that drives returns, suggesting fluctuations in the oil price as a source of stock return premia in these markets. Our tests further suggest that a portfolio strategy based on a stock's absolute exposure to oil price risk yields significant positive subsequent returns as well, suggesting an investment strategy based on the absolute oil price risk exposure of stocks in net exporting nations.
Author: Riza Demirer
Publisher:
ISBN:
Category :
Languages : en
Pages : 37
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Book Description
The main goal of this paper is to examine whether oil price risk is systematically priced in the cross-section of stock returns in net oil-exporting countries even after controlling for market and firm-level risk factors. Using firm-level data from the Gulf Arab stock markets, we find that stocks that are more sensitive to oil price changes indeed yield significantly higher returns, suggesting that oil price exposure can serve as a return predictor in these stock markets. However, we also find that it is the absolute exposure of a stock that drives returns, suggesting fluctuations in the oil price as a source of stock return premia in these markets. Our tests further suggest that a portfolio strategy based on a stock's absolute exposure to oil price risk yields significant positive subsequent returns as well, suggesting an investment strategy based on the absolute oil price risk exposure of stocks in net exporting nations.
Author: Nima Ebrahimi
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
We show that exposure to the risk of kurtosis in oil market drives the cross-section of stock returns from 1996 to 2014. The average monthly difference between the return of portfolio of stocks with low exposure and high exposure to the risk of kurtosis is -0.37%, showing that higher exposure to oil's kurtosis risk will be penalized by lower average returns. We are able to confirm the significance of kurtosis risk within the statistical framework of Carhart 4-factor model. In contrast to the skewness risk, which is only a significant player in some of the sub-periods, kurtosis risk is keeping its significance through all sub-periods, as well as after taking market moments into account and within different maturities. The significance of the risk of skewness gets more evident moving from shorter to longer maturities. The risk of volatility, which has been shown to be a significant-priced risk in the cross-section of stock returns in literature, loses its significance after controlling for the third and fourth moments.
Author: Peter Christoffersen
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Komeil Shaeri
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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This study examines the oil price risk exposure of U.S. financial and non-financial industries over the period of January 1983 to March 2015. We include the oil price risk factor into the Fama and French five-factor asset pricing model and identify the structural breaks in the equity returns using the test created by Bai and Perron. The oil price risk exposures of financial and non-financial industries are estimated at the subsector level. The results show that the degree of oil price sensitivity differs noticeably across subsectors and over time. The magnitude of oil prices' impact on the financial subsectors is considerably lower than the magnitude of its impact on the non financial subsectors. Among the financial subsectors, Mortgage Finance and Real Estate Services have the largest negative and positive exposures to oil price risk, respectively. Among the non-financial subsectors, Airlines and Oil Equipment Services have the largest negative and positive oil price risk exposures, respectively.
Author: Nima Ebrahimi
Publisher:
ISBN:
Category :
Languages : en
Pages :
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We show that the innovation in the risk-neutral probability of large downward and upward jumps in oil prices has a considerable predictive power for important economic indicators such as GDP growth, consumption growth, and total investment. In addition, we observe that the upside jump risk probability is a significant predictor of stock market index return and the returns of oil futures. Furthermore, the upside jump probability is a significant and relatively strong predictor of oil market fundamentals including inventory growth, demand growth, and OPEC's production growth. Upside jump risk is also a driver of the cross-section of stock returns before the U.S. oil production increase in 2011. The average monthly return for the high-low upside jump risk exposure portfolio is -0.94% and -1.13%, using the 1996-2014 and 1996-2011 time periods respectively. The implications of the variance risk for the cross-section of stock returns vanishes after controlling for the large upside and downside jump risks. The shale revolution and considerable increase of the US oil production have killed the effect of upside risk premium after 2011. During the sub-period 2011-2014, the variance risk premium gets significant again, like it was before 2000.
Author: Central Intelligence Agency
Publisher: Simon and Schuster
ISBN: 1628731818
Category : Reference
Languages : en
Pages : 2796
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Book Description
From Afghanistan to Zimbabwe, The CIA World Factbook 2012 offers complete and up-to-date information on the world’s nations. This comprehensive guide is packed with detailed information on the politics, populations, military expenditures, and economics of 2012. For each country, The CIA World Factbook 2012 includes: Detailed maps with new geopolitical data Statistics on the population of each country, with details on literacy rates, HIV prevalence, and age structure New data on military expenditures and capabilities Information on each country’s climate and natural hazards Details on prominent political parties, and contact information for diplomatic consultation Facts on transportation and communication infrastructure And much more! Also included are appendixes with useful abbreviations, international environmental agreements, international organizations and groups, weight and measure conversions, and more. Originally intended for use by government officials, this is a must-have resource for students, travelers, journalists, and business people with a desire to know more about their world.
Author: Mohan Singh Nandha
Publisher:
ISBN:
Category :
Languages : en
Pages : 408
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Book Description
Oil is a special type of commodity which plays a significant role in modem economic activity. The influence of the oil (crude oil) price on stock markets is often recognised and reported in the financial press. This thesis examines the role of the oil price in explaining stock market returns. By applying different methodologies and datasets, empirical evidence has been gathered on various dimensions of the issue which include short-run and long-run comparisons, cross-country analysis, sector¬focused analysis, cross-sector comparisons and a global view. Four of the studies included in this thesis use multi-country data and four are based on multi-sector equity data. Overall, all countries and all sectors (subject to data availability) have been covered in one or another study. Results of a study focused on India, Pakistan and Sri Lanka (all net oil importers) indicate several industries to be significantly sensitive to the oil price factor in the long-run, whereas very little sensitivity to oil price is detected in the short run. Perhaps, this might be an indication that because of the regulated nature of fuel pricing in all three countries, it could take time before the price change is aJlowed to impact consumers and firms. Cross country and cross sector comparisons suggest that the oil price impact on stock market returns is inconsistent across countries and varies across sectors. These differences might be a consequence of regulatory and structural disparities across countries. Across sector variations may result from differing sector abilities to pass on higher fuel costs to customers. In addition, intensity of a sector to the use of oil and its by-products would also make a difference. Two of the studies are sector focused, covering the 'oil and gas' and 'transportation' sectors. These sectors are special in a sense that oil is the main output for the first sector and a major cost component for the second sector. Evidence from the U.S. market suggests that oil and gas stock returns are positively sensitive to the oil price, but an oil risk premium is not priced in the returns. This finding could suggest that oil price risk is diversifiable or can be effectively hedged by investors in oil and gas stocks. The transport sector focused study provides a global perspective in a sense that all countries are covered. This study is supportive of oil playing a jointly significant role in the transport sector returns for the Developed, Europe and 07 country groups. Finally, a study based on global sector indices is indicative of a negative impact on all sector returns except the mining, and oil and gas sectors. These results are consistent with the theoretical logic that a rise in the oil price is likely to reduce the profitability of firms which use oil and/or by-products of oil. This type of agreement between the theory and empirical evidence may also suggest that globally diversified and sector specific portfolios are the best choice for analysing the oil price sensitivity of stock market returns. Overall, oil appears to have some connectivity with the pricing of equities but various types of cross country and cross sector disparities make the pricing dynamics complex and difficult to quantify in exact terms.
Author: David C. Broadstock
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We attempt to consolidate (at least in part) the vast literature on oil shocks and stock returns by decomposing the influence of oil shocks into two channels of effect: 'direct' and 'indirect'. Using a simple empirical asset pricing model, it is shown that oil shocks can affect stocks not only directly, but also indirectly through general market risk (which is shown to be due in part to oil shocks), or put another way that additional oil price risk exposure is embedded in the traditional market beta. As far as is known this is the first paper explicitly quantifying both effects together. By doing so we offer a more complete picture of when and how oil shocks impact stock returns, thus allowing investors to make more informed responses to oil shocks. The results are illustrated using daily data from all (active) listed energy related stock portfolios in the Asia Pacific Region, and are robust to structural instability and the specification of oil shock used.
Author: Stijn Claessens
Publisher: World Bank Publications
ISBN:
Category : Rate of return
Languages : en
Pages : 28
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Book Description
Author: Dennis Bams
Publisher:
ISBN:
Category :
Languages : en
Pages :
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