Impact of Oil Price Changes on Stock Returns of UK Oil and Gas Companies: A Wavelet-Based Analysis

Liu, Jingzhen

doi:10.2139/ssrn.2997025

Cited by 3 publications

(3 citation statements)

References 49 publications

(59 reference statements)

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“…The relationship is explained by the fact that oil price represents an input for many industries, thus an increase in oil price leads to economic turmoil by creating inflation and unemployment [21]. Jinghzen et al [22] analyzed the influence of oil price changes on stock returns of UK oil and gas companies at different time scales using the wavelet analysis. By decomposing the original return series into multiscale orthogonal components the changes can be better monitored in the short, medium, and long-term.…”

Section: Literature Reviewmentioning

confidence: 99%

Oil Price and Stock Prices of EU Financial Companies: Evidence from Panel Data Modeling

et al. 2019

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Crude oil is an indispensable resource for the world economy and European Union (EU) countries are strongly dependent on oil imports. In a framework defined by generally positive correlations between oil and stock prices, the paper investigates the relationship between financial companies’ stock prices and crude oil price using a sample of major financial companies headquartered in the EU. The link between stock prices and oil price risk is modelled using a set of macroeconomic variables that includes local stock market indices, the EUR/USD exchange rate, the oil imports dependency, inflation rate, and global volatility indices. We employ panel data as the base econometric model and an ARDL extension that is more appropriated for our research objectives. Our findings show that the EU financial sector is pervasively exposed to oil price changes over the long-run and this exposure is a component of financial companies’ exposure to real economy risk factors, which points towards the key role of the financial sector in the EU economy in transmitting systemic shocks. At the same time, we detect signs of a different behavior of market investors over the short-versus the long-run concerning the valuation of financial companies’ stock prices in relation to oil price and other macroeconomic variables, which raises distressing challenges for financial authorities.

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Section: Literature Reviewmentioning

confidence: 99%

Oil Price and Stock Prices of EU Financial Companies: Evidence from Panel Data Modeling

et al. 2019

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“…Although in this case results are more evident over the long run (after a period of 60 months), other researchers found through an unrestricted VAR model a significant positive impact of oil price shocks on stock returns, over the short-run [ 7 ]. For the oil and gas companies in the UK, the oil price shocks seem to have both, negative and positive effects on stock prices [ 8 ]. More specifically, the study shows through wavelet analysis that over the short term risks and oil price have weak effects on oil and gas industry investors, who can still diversify their portfolios’, but risks become more important for long-term investors.…”

Section: Literature Reviewmentioning

confidence: 99%

Addressing oil price changes through business profitability in oil and gas industry in the United Kingdom

et al. 2018

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In this paper, we investigate how crude oil price and volume traded affected the profitability of oil and gas companies in the United Kingdom (UK) since the financial crisis started in 2008. The study benefit from insights of the financial statements, to develop a model that focuses on how changes in oil price impact corporate performance. In order to observe the financial indicators that influence the performance, as well as the effects that changes in oil prices and demand of crude oil have on the profitability of oil and gas companies, we apply comparative regression analysis, including the generalised method of moments estimation technique for panel data set. The sample is consisting of 31 oil and gas companies in the UK, and the period analysed is 2006–2014. Results show that profitable oil and gas companies managed to face the drop in oil price and recover, characterized by significant cash flows and stock turnover, efficient use of assets, and high solvency rates. Although the oil price and volume traded do not significantly affect profitability and other financial ratios, if the oil price continues to decrease, it would permanently alter both the UK economy and oil and gas companies. In order to survive, companies make drastic cuts and defer essential investments, often at the long-term expense of asset performance. This study is important in a world where the energy consumption steadily grew over time. However, the renewable energy is cheaper and more environmentally friendly, and thus, countries where oil and gas industry is one of the most popular sectors face an economic decline. These results could be useful for investors, managers or decision makers, reclaiming strategic decisions in the current uncertain and volatile environment.

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“…Oil and gas companies are price takers due to the oligopolistic nature of the markets (Berger 1988;Lin 2014). Individual companies thus refrain from investing or cut back on capital expenditure (CE) during low product price regimes (Lin 2014;Liu 2017;Kim and Choi, 2019;Financial Times June 15 2016;Reuters October 3 2018).…”

Section: Introductionmentioning

confidence: 99%

The fiscal regime for UK shale gas: Analysing the impacts of pad allowance on shale gas investments

Acquah-Andoh

Ike²,

Ifelebuegu

et al. 2020

Energy Policy

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Impact of Oil Price Changes on Stock Returns of UK Oil and Gas Companies: A Wavelet-Based Analysis

Cited by 3 publications

References 49 publications

Oil Price and Stock Prices of EU Financial Companies: Evidence from Panel Data Modeling

Oil Price and Stock Prices of EU Financial Companies: Evidence from Panel Data Modeling

Addressing oil price changes through business profitability in oil and gas industry in the United Kingdom

The fiscal regime for UK shale gas: Analysing the impacts of pad allowance on shale gas investments

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