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Publication Detailed Description
Journal Title
Journal of Energy Markets
Year (definitive publication)
2017
Language
English
Country
United Kingdom
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Abstract
Recent research identifies several industry-related patterns that standard asset pricing models cannot explain effectively. This paper investigates what explains the cross-section of returns of firms in the oil industry and, in particular, how well an oil factor performs in comparison with the common systematic factors identified in the literature. We conduct a time series analysis and demonstrate that the oil factor has substantial explanatory power over traditional factors. A cross-sectional regression shows that the size, momentum and oil factors are associated with a positive risk premium and are able to explain the cross-sectional variation in stock returns in the oil industry. Our results suggest that investors demand compensation for the exposure to oil price changes, which has implications for the computation of the cost of equity.
Acknowledgements
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Keywords
Anomalies,Asset pricing,Cross-sectional tests,Oil industry,Oil prices,Time series tests
Fields of Science and Technology Classification
- Other Natural Sciences - Natural Sciences
- Economics and Business - Social Sciences
Funding Records
| Funding Reference | Funding Entity |
|---|---|
| ECO2012-3240 | Ministerio de Economía, Industria y Competitividad |
| UID/GES/00315/2013 | Fundação para a Ciência e a Tecnologia |
| ECO2015-65701-P | Ministerio de Economía, Industria y Competitividad |
| ECO2015-70331-C2-2-R | Ministerio de Economía, Industria y Competitividad |
Contributions to the Sustainable Development Goals of the United Nations
With the objective to increase the research activity directed towards the achievement of the United Nations 2030 Sustainable Development Goals, the possibility of associating scientific publications with the Sustainable Development Goals is now available in Ciência-IUL. These are the Sustainable Development Goals identified by the author(s) for this publication. For more detailed information on the Sustainable Development Goals, click here.
