The Association between Earnings Sensitivity Measures and Market Determined Risk Exposures: The Case of Oil Price Risk for Petroleum Refiners

33 Pages Posted: 22 Jan 1999

See all articles by Shivaram Rajgopal

Shivaram Rajgopal

Columbia Business School

Mohan Venkatachalam

Duke University - Fuqua School of Business

Date Written: December 1998

Abstract

Using a sample of petroleum refining firms, this paper provides evidence that earnings sensitivity measures analogous to those mandated by the SEC's (1997) new market risk disclosure rules are positively associated with stock market determined oil price exposures. We also find that earnings sensitivity measures are useful in predicting future stock market determined oil price exposures. Because sensitivity disclosures under SEC (1997) are either unavailable or cross-sectionally not comparable at the present time, this study constructs proxies for earnings sensitivity measures using extant information. Hence, we view our study as providing early evidence on the risk-relevance of the newly mandated earnings sensitivity disclosures.

JEL Classification: G12, G14, M41, M45

Suggested Citation

Rajgopal, Shivaram and Venkatachalam, Mohan, The Association between Earnings Sensitivity Measures and Market Determined Risk Exposures: The Case of Oil Price Risk for Petroleum Refiners (December 1998). Available at SSRN: https://ssrn.com/abstract=145428 or http://dx.doi.org/10.2139/ssrn.145428

Shivaram Rajgopal

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Mohan Venkatachalam (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7859 (Phone)
919-660-7971 (Fax)

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