Journal
ENERGY ECONOMICS
Volume 30, Issue 3, Pages 986-997Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.eneco.2007.09.003
Keywords
oil price; global industry sectors; equity returns; asset pricing
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Many studies indicate that oil price shocks have an adverse effect on real output and, hence, an adverse effect on corporate profits where oil is used as a key input. The present study examines whether and to what extent the adverse effect of oil price shocks impacts stock market returns. To this end we, analyse 35 DataStream global industry indices for the period from April 1983 to September 2005. Our findings indicate that oil price rises have a negative impact on equity returns for all sectors except mining, and oil and gas industries. Generally, these results are consistent with economic theory and evidence provided by previous empirical studies. Little evidence of any asymmetry is detected in the oil price sensitivities. In light of our findings, we recommend that international portfolio investors consider hedging oil price risk. (c) 2007 Elsevier B.V. All rights reserved.
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