Journal
NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE
Volume 57, Issue -, Pages -Publisher
ELSEVIER SCIENCE INC
DOI: 10.1016/j.najef.2021.101388
Keywords
And phrases; Crude oil prices; Volatility of jet fuel prices; Uncertainty; Stock returns; Airline companies; SVAR
Categories
Funding
- Ministerio de Economia y Competitividad [ECO2017-83183-R]
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The study finds that oil price increase, economic uncertainty, and jet fuel price volatility have significantly adverse effects on stock returns of U.S. airlines. In addition, hedging future fuel purchase has a statistically positive impact on smaller airlines.
This paper examines the impacts of economic policy uncertainty and oil price shocks on stock returns of U.S. airlines using both industry and firm-level data. Our empirical approach considers a structural vector-autoregressive model with variables recognized to be important for airline returns including jet fuel price volatility. Empirical results confirm that oil price increase, economic uncertainty and jet fuel price volatility have significantly adverse effect on real stock returns of airlines both at industry and at firm level. In addition, we also find that hedging future fuel purchase has statistically positive impact on the smaller airlines. Our results suggest policy implications for practitioners, managers of airline industry and commodity investors.
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