Oil Risk Exposure: The Case of the U.S. Oil and Gas Sector

27 Pages Posted: 10 Jan 2011

See all articles by Sunil Mohanty

Sunil Mohanty

University of St. Thomas - Opus College of Business

Mohan Nandha

Monash University - Department of Accounting

Abstract

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.

Keywords: oil shocks, oil risk exposure, oil and gas sector

JEL Classification: C32, G10

Suggested Citation

Mohanty, Sunil K. and Nandha, Mohan, Oil Risk Exposure: The Case of the U.S. Oil and Gas Sector. Financial Review, Vol. 46, No. 1, pp. 165-191, 2011. Available at SSRN: https://ssrn.com/abstract=1736917 or http://dx.doi.org/10.1111/j.1540-6288.2010.00295.x

Sunil K. Mohanty (Contact Author)

University of St. Thomas - Opus College of Business ( email )

1000 LaSalle Avenue
TMH 443
Minneapolis, MN 55403
United States

Mohan Nandha

Monash University - Department of Accounting ( email )

Peninsula Campus, Building D
Frankston, Victoria 3199
Australia
613 9904 4610 (Phone)
613 9904 4145 (Fax)

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