US airline stock market performance and change in investor behaviour over the great recession of 2008

Abstract

We study the relationship of West Texas Intermediate (WTI) crude oil returns and the stock market returns with the US airline stocks before, during and after the 2008 financial crisis. We confirm the positive relationship of the airline stock returns with the overall market and the negative relationship with WTI. However, we find that the crisis led to a structural change in this relationship. Our results differ for low-cost airlines which absorb the oil price shock better as compared to legacy airlines. We also find that there is a difference in the relationship between the airline stock returns and WTI returns when asymmetric WTI returns are considered. Investors punish airline stocks more when there are asymmetric negative WTI returns as compared to asymmetric positive returns. While our results are in line with the existing literature on the overall stock markets, this study is unique because it provides a context for the behavior of airline stocks.

Time Series Analysis of Long-Term Stock Performance of Airlines: The Case of Turkish Airlines

“…It concluded that the impact of inflation exceeded potential gains from money supply in the long run. Wood & Gokhale (2017) confirmed a positive relationship between general stock market returns and airline stock returns.…”

“…Using the Engle-Granger cointegration method, they addressed a longterm relation between oil prices and the share prices of major airlines, highlighting the significant monthly adjustment rates in response to deviations. Wood & Gokhale (2017) investigated the stock performance of U.S. airline companies during the 2008 Great Recession. The study found that airline stocks exhibited similar movements to the overall stock market during this period, indicating a correlation.…”