Energy mutual funds and oil prices

Gormus, Alper; Diltz, J. David; Soytaş, Uğur

doi:10.1108/mf-04-2017-0124

Cited by 6 publications

(6 citation statements)

References 41 publications

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“…For the comparatively less significant characteristics, we find the net vs. gross expense ratio, social risk score, and governance risk score to impact the probability of a price transmission at 5% statistical significance. Several studies have shown the importance of the Morningstar rating and manager tenure to be important in investor decisions (see Blake and Morey 2000;Ben-David et al 2022;Gormus et al 2018a;and others). Our tests provide further evidence of the importance of these "quality" characteristics in manager trading decisions and investor sentiment.…”

Section: Variablementioning

confidence: 99%

Environmental, Social, and Governance Considerations in WTI Financialization through Energy Funds

Gormus

Nazlıoğlu

Beach

2023

JRFM

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This study investigates interactions between energy funds and the oil market and examines the influence of environmental, social, and governance (ESG) criteria in dynamic responses by fund managers and investors. We test for price and volatility transmission (also referred to as “spillover”) between energy funds and the oil market using recently developed econometric techniques. After identifying specific information flows, we investigate whether certain fund characteristics, including several ESG dimensions, are associated with the existence of information transmissions. Then, in logit regressions, we seek to identify if energy fund managers and their investors make decisions using information regarding ESG metrics, including fossil fuel involvement. The results confirm bidirectional price and volatility transmission between energy funds and the oil market, consistent with evidence of the financialization of energy markets that has been identified in recent studies. Several ESG dimensions are shown to influence investor sentiment and affect price and volatility interactions. Dynamic investor decisions in funds in reaction to oil prices do not appear to be strongly influenced by the fossil fuel involvement of the funds. Fund flows do appear to influence the oil market, with fund fossil fuel involvement being an important factor. This paper evaluates the impact of granular ESG characteristics on energy mutual fund flows, price, and volatility interactions with the oil market. While our results support the findings from previous studies, they also provide several new insights into the impacts of ESG criteria and investor behavior, particularly the dynamic response by fund managers and energy market investors related to the fossil fuel involvement of the funds.

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Section: Variablementioning

confidence: 99%

Environmental, Social, and Governance Considerations in WTI Financialization through Energy Funds

Gormus

Nazlıoğlu

Beach

2023

JRFM

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“…Investors can benefit from the knowledge of fund managers and reduce costs through investing in energy mutual funds. Most energy mutual funds hold a substantial amount of stocks in various oil sectors, even though they diversify their holdings for alternative energy [32]. These fund managers prefer companies that operate within the oil industry for their sheer size and revenue.…”

Section: Oil Etf and Energy Mutual Fundmentioning

confidence: 99%

“…The rising oil prices increase the profits of the energy-producing firms. Gormus et al [32] identified a significant impact of crude oil prices on energy mutual funds. In particular, these authors also highlighted that energy mutual funds with better investment performance show higher interactions with the oil markets for both price and volatility [32].…”

Section: Crude Oil and Energy Fundmentioning

confidence: 99%

Volatility Transmission from Equity, Bulk Shipping, and Commodity Markets to Oil ETF and Energy Fund—A GARCH-MIDAS Model

Lin

Chang

2020

Mathematics

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Oil continues to be a major source of world energy, but oil prices and funds have experienced high volatility over the last decade. This study applies the generalized autoregressive conditional heteroskedasticity-mixed-data sampling (GARCH-MIDAS) model on data spanning 1 July 2014 to 30 April 2020 to examine volatility transmission from the equity, bulk shipping, commodity, currency, and crude oil markets to the United States Oil Fund (USO) and BlackRock World Energy Fund A2 (BGF). By dividing the sample into two subsamples, we find a significant volatility transmission from the equity market to the oil ETF and energy fund both before and after the 2018 U.S.–China trade war. The volatility transmission from the bulk shipping, commodity, and crude oil markets turns significant for the oil ETF and energy fund after the 2018 U.S.–China trade war, extending into the COVID-19 pandemic in early 2020. The results suggest that investors can use the equity market to predict the movement of oil and energy funds during both tranquil and turmoil periods. Moreover, investors can use bulk shipping, commodity, and crude oil markets in addition to the equity market to forecast oil and energy funds’ volatility during the turmoil periods. This paper benefits investors against the high volatility of the energy funds.

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“…Several researchers found volatility transmissions between these markets in varying directions and with varying degrees of statistical significance (see Le and Chang 2015;Mensi et al 2017;Gormus et al 2014). Energy mutual funds heavily interact with the energy commodity markets (Gormus et al 2018(Gormus et al , 2023. Of particular interest when examining oil and gas focused mutual funds is how a firm deals with water issues.…”

Section: Introductionmentioning

confidence: 99%

Impact of Water Management Policies on Volatility Transmission in the Energy Sector

Gormus,

Harrell

2024

JRFM

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Purpose: This study evaluates the impact of the water management policies of energy companies on their volatility interactions with energy commodities. Design/methodology: We tested for volatility transmissions between 66 energy funds and fossil-fuel commodities. After identifying possible integrations, we investigated whether water management policies, after controlling for other fund characteristics, impact the probability of integration. Results: Our findings indicate strong volatility transmission from oil prices to energy funds. However, a reverse of this information flow was not observed. From the perspective of natural gas, we found strong bi-directional integration with energy funds. When we analyzed the influence of fund characteristics on the previously established integrations, water management policies do not impact the probability of the integration of oil. However, these policies are shown to have a significant influence on integration with the natural gas market. Originality/value: While there are multiple studies that show the integration between energy companies and corresponding commodities, according to our knowledge, this is the first study that evaluates the significance of water management policies with respect to volatility integration. This study highlights the importance of water-related policies with respect to the susceptibility of energy firms to volatility contagion from the natural gas market.

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Energy mutual funds and oil prices

Cited by 6 publications

References 41 publications

Environmental, Social, and Governance Considerations in WTI Financialization through Energy Funds

Environmental, Social, and Governance Considerations in WTI Financialization through Energy Funds

Volatility Transmission from Equity, Bulk Shipping, and Commodity Markets to Oil ETF and Energy Fund—A GARCH-MIDAS Model

Impact of Water Management Policies on Volatility Transmission in the Energy Sector

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