Relationships among U.S. oil prices and oil industry equity indices

Hammoudeh, Shawkat; Dibooğlu, Sel; Aleisa, Eisa A.

doi:10.1016/s1059-0560(03)00011-x

Cited by 185 publications

(79 citation statements)

References 34 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In economic terms, cointegration implies an equilibrium or long-term relationship in which assets or variables can exhibit similar movements over time due to shared or collective factors (Granger, 1981;Engle and Granger, 1987). The presence of such a relationship may have significant financial implications in the form of diversification benefits reduction (Hammoudeh et al, 2004). The absence of cointegration can empower our later safe haven investigation and provide a basis for good portfolio diversification, as the asset classes will be sufficiently distinct.…”

Section: Stationarity and Cointegrationmentioning

confidence: 99%

Diversifying away the risk of war and cross-border political crisis

2017

View full text Add to dashboard Cite

This paper investigates the behavior of crude oil prices, government bonds and stock market indices around outbreaks of severe international crises and wars. Using a constant-mean-return event study, we show that these events are associated with positive and significant abnormal returns on oil and bonds, which means that these two asset classes can potentially shelter shareholders from plummeting equity values during international crises. A formal safe haven analysis confirms this insight. Such price movements may reflect a reallocation of funds across asset classes in response to the events, as well as shifts in the demand for oil due to precautionary, speculative and military motives. We also calculate the weights for optimal portfolios, which could provide insurance against conflict risk.JEL classification: G11, G12, Q34

show abstract

Section: Stationarity and Cointegrationmentioning

confidence: 99%

Diversifying away the risk of war and cross-border political crisis

2017

View full text Add to dashboard Cite

show abstract

“…However, the existing literature has also stressed the importance of resource price change variables as determinants of energy stock prices. Manning (1991) for the UK oil industry, Hammoudeh et al (2004) for its U.S. counterpart, Faff and Brailsford (1999) for the Australian oil and gas sector, and Sadorsky (2001) and Boyer and Filion (2007) for the Canadian energy industry show that besides the market return, the oil and, in some cases, the gas price change may be important drivers of stock returns of energy-related businesses. European energy stocks, according to Oberndorfer (2008), are sensitive to oil, but not to gas price changes.…”

Section: Empirical Approachmentioning

confidence: 99%

EU Emission Allowances and the Stock Market: Evidence from the Electricity Industry

Oberndorfer

2008

SSRN Journal

View full text Add to dashboard Cite

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp08059.pdf Non-Technical SummaryThis paper constitutes -to our knowledge -the first econometric analysis on stock market effects of the EU Emission Trading Scheme. We analyse electricity stock return reactions to changes in EU Emission Allowance (EUA) prices, taking into account possible asymmetries in the relationship between EUA price changes and electricity stock returns, as well as country-and time-specific effects. Moreover, we test whether EUA return volatility and European electricity stock volatility are related. Our results suggest that EUA price increases (decreases) positively (negatively) affect stock returns from the most important electricity corporations covered by the EU ETS. In this respect, the electricity corporations considered are upvalued in case of an EUA appreciation, and downvalued in situations where the price of EU Emission Allowances falls. The effect differs from country to country: Amongst the electricity corporations considered, Spanish corporations are shown to exhibit a negative EUA-to-stock market relationship. In contrast, the effect is positive for corporations from other countries such as Germany and the UK. Stock markets do not seem to react differently to EUA appreciations in comparison to depreciations. Moreover, electricity stock return and EUA price change volatility are not shown to be positively related.Given these results, it becomes apparent that EU ETS effectively has an impact on financial markets and has economic consequences, affecting the value of the corporations covered. The first ETS phase seems to be marked at least to some extent by uncertainty of financial market agents concerning the importance of the newly created EU carbon market for the stock market: The EUA effect on electricity stocks is shown to vary over time, being especially high during the EUA market shock in early 2006. Such a "premium" on the EUA effect could be based on the exceptionally high attention of the general public (and seemingly also of stock market agents) to the carbon market at that time. The fact that EUA price changes positively affect European electricity stocks (at least for most countries analysed) is the consequence of fully rational electricity pricing under a grandfathering allocation rule if pass-through for costs created by the ETS is possible. This result, however, calls into question free allowance allocation to these corporations,...

show abstract

“…The …rst strand of literature on this topic focuses on comovements between commodity prices, mainly oil prices, and stock markets, as well as volatility spillover e¤ects. Hammoudeh et al (2004), using cointegration techniques as well as ARCH-type speci…ca-tions among …ve daily S&P oil sector stock indices and …ve daily oil prices for the US oil markets from July 1995 to October 2001 …nd volatility spillover e¤ects from the oil futures market to the stocks of some oil sectors. Chiou and Lee (2009) focusing on the asymmetric e¤ects of WTI daily oil prices on S&P 500 stock returns from January 1992 to November 2006, investigate the structure changes in this dependency relationship.…”

Section: Comovements Between Commodity and …Nancial Pricesmentioning

confidence: 99%

Heterogeneous Beliefs, Regret, and Uncertainty: The Role of Speculation in Energy Price Dynamics

Joëts

2013

SSRN Journal

View full text Add to dashboard Cite

This paper proposes to investigate the impact of …nancialization on energy markets (oil, gas, coal and electricity European forward prices) during both normal times and extreme ‡uctuation periods through an original behavioral and emotional approach. To this aim, we propose a new theoretical and empirical framework based on a heterogeneous agents model in which fundamentalists and chartists co-exist and are subject to regret and uncertainty. We …nd signi…cant evidence that energy markets are composed by heterogeneous traders which behave di¤erently depending on the intensity of the price ‡uctuations and uncertainty context. In particular, energy prices are mainly governed by fundamental and chartist neutral agents during normal times whereas they face to irrational chartist averse investors during extreme ‡uctu-ations periods. In this context, the recent energy prices surge can be viewed as the consequence of irrational exhuberance. Our new theoretical model outperforms the random walk in out-of-sample predictive ability.JEL Classi…cation: Q43, G15, G02, D81

show abstract

Relationships among U.S. oil prices and oil industry equity indices

Cited by 185 publications

References 34 publications

Diversifying away the risk of war and cross-border political crisis

Diversifying away the risk of war and cross-border political crisis

EU Emission Allowances and the Stock Market: Evidence from the Electricity Industry

Heterogeneous Beliefs, Regret, and Uncertainty: The Role of Speculation in Energy Price Dynamics

Contact Info

Product

Resources

About