Assessing the impact of oil prices on firms of different sizes: Its tough being in the middle

Sadorsky, Perry

doi:10.1016/j.enpol.2008.07.019

Cited by 150 publications

(95 citation statements)

References 51 publications

(55 reference statements)

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“…Another study by Nandha and Faff (2008) also indicated that increase in oil price has a negative effect on stock returns for most sectors except mining and some related industries such as oil and gas industries. In addition, Sadorsky (2008) showed that increases in firm size or oil prices reduce stock market price returns, and increases in oil prices have more impact on stock market returns than decreases in oil prices do. Our prior expectation in this study is that the effect of increase in crude oil price on stock market index in China and India is negative.…”

Section: Literature Reviewmentioning

confidence: 99%

The Role of Macroeconomic Variables on Stock Market Index in China and India

Hosseini¹,

Ahmad²,

Lai³

2011

IJEF

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This paper investigates the relationships between stock market indices and four macroeconomics variables, namely crude oil price (COP), money supply (M2), industrial production (IP) and inflation rate (IR) in China and India. The period covers in this study is between January 1999 to January 2009. Using the Augmented Dickey-Fuller unit root test, the underlying series are tested as non-stationary at the level but stationary in first difference. The use of Johansen-Juselius (1990) Multivariate Cointegration and Vector Error Correction Model technique, indicate that there are both long and short run linkages between macroeconomic variable and stock market index in each of these two countries.

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Section: Literature Reviewmentioning

confidence: 99%

The Role of Macroeconomic Variables on Stock Market Index in China and India

Hosseini¹,

Ahmad²,

Lai³

2011

IJEF

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“…However, Federer [13] claims that part of the asymmetric relationship between oil price changes and output growth found in previous studies can be explained by the economy's response to oil price volatility. On the other hand, Sadorsky [14] finds that either an oil price change or its volatility has an impact on real stock returns. On the issue of volatility, Arouri et al [8] examine Gulf Cooperation Council (GCC) countries over the period 2005-2010 and Masih et al [9] on Korean market provide support on the importance of volatility in testing the relationship between the two variables.…”

Section: Source: Energy Information Administration (Eia) Internationamentioning

confidence: 99%

“…Their results et al Huang [2] and Juncal and Fernando [6] find that the support previous studies which suggest that emerging stock markets operate under a different set of market forces, competitive environments and government regulations. Literatures on the effect of oil prices has also found asymmetric effects in which both oil price hikes and falls are likely to have different effects on the stock markets (Basher and Sadorsky [11], Sadorsky [14]). Oil price hikes have a negative impact on stock returns but drops in oil prices do not necessarily have a positive impact.…”

Section: Source: Energy Information Administration (Eia) Internationamentioning

confidence: 99%

Oil Price Fluctuations and Firm Performance in an Emerging Market: Assessing Volatility and Asymmetric Effect

Janor¹,

Abdul-Rahman²,

Housseinidoust³

et al. 2013

JOEBM

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Abstract-This study examines the impact of oil price volatility on firm performance in the context of an emerging market, Malaysia. The effect of crude oil price on the performance is examined for the period of January 1986 to December 2011 using GARCH and EGARCH models reflecting the evaluation on volatility and asymmetric effects. Results indicate the significant effect of oil price volatility on stock market volatility and also the asymmetric effects. For policy makers, the findings help to clarify the dilemma of whether the government should subsidize or totally depend on global oil prices in ensuring the sustainability and competitiveness of Malaysian companies. In addition, the results may assist businessmen in managing cost structures in the event of rising oil prices in relation to both short term and long term planning and provide investors with a better picture of the exposure to oil price risks when investing in Malaysian companies.

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“…An increase in oil volatility does not affect most stock returns, but may increase speculation in the mining and petrochemical indexes, thereby increasing the associated stock returns. Sadorsky (2008) finds that the stock prices of small and large firms respond fairly symmetrically to changes in oil prices, but for mediumsized firms the response is asymmetric to changes in oil prices. From simulations using a VAR model, Henriques and Sadorsky (2008) show that shocks to oil prices have little impact on the stock prices of alternative energy companies.…”

Section: Crude Oil and Stock Marketsmentioning

confidence: 99%

Conditional Correlations and Volatility Spillovers between Crude Oil and Stock Index Returns

2010

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This paper investigates the conditional correlations and volatility spillovers between crude oil returns and stock index returns. Daily returns from 2 January 1998 to 4 November 2009 of the crude oil spot, forward and futures prices from the WTI and Brent markets, and the FTSE100, NYSE, Dow Jones and S&P500 index returns, are analysed using the CCC model of Bollerslev (1990), VARMA-GARCH model of Ling and McAleer (2003), VARMA-AGARCH model of McAleer, Hoti and Chan (2008), and DCC model of Engle (2002). Based on the CCC model, the estimates of conditional correlations for returns across markets are very low, and some are not statistically significant, which means the conditional shocks are correlated only in the same market and not across markets. However, the DCC estimates of the conditional correlations are always significant. This result makes it clear that the assumption of constant conditional correlations is not supported empirically. Surprisingly, the empirical results from the VARMA-GARCH and VARMA-AGARCH models provide little evidence of volatility spillovers between the crude oil and financial markets. The evidence of asymmetric effects of negative and positive shocks of equal magnitude on the conditional variances suggests that VARMA-AGARCH is superior to VARMA-GARCH and CCC.

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Assessing the impact of oil prices on firms of different sizes: Its tough being in the middle

Cited by 150 publications

References 51 publications

The Role of Macroeconomic Variables on Stock Market Index in China and India

The Role of Macroeconomic Variables on Stock Market Index in China and India

Oil Price Fluctuations and Firm Performance in an Emerging Market: Assessing Volatility and Asymmetric Effect

Conditional Correlations and Volatility Spillovers between Crude Oil and Stock Index Returns

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