Premium
Oil Risk Exposure: The Case of the U.S. Oil and Gas Sector
Author(s) -
Mohanty Sunil K.,
Nandha Mohan
Publication year - 2011
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2010.00295.x
Subject(s) - capital asset pricing model , economics , oil price , petroleum industry , fossil fuel , oil storage trade , financial economics , momentum (technical analysis) , asset (computer security) , crack spread , monetary economics , chemistry , environmental science , computer security , organic chemistry , environmental engineering , computer science
We estimate oil price risk exposures of the U.S. oil and gas sector using the Fama‐French‐Carhart's four‐factor asset pricing model augmented with oil price and interest rate factors. Results show that the market, book‐to‐market, and size factors, as well as momentum characteristics of stocks and changes in oil prices are significant determinants of returns for the sector. Oil price risk exposures of U.S. oil and gas companies in the oil and gas sector are generally positive and significant. Our study also finds that oil price risk exposures vary considerably over time, and across firms and industry subsectors.