US Oil Price Exposure: The Industry Effects

18 Pages Posted: 3 Oct 2011 Last revised: 28 Feb 2012

See all articles by Don Bredin

Don Bredin

University College Dublin (UCD) - Department of Banking & Finance

John Elder

Colorado State University

Date Written: September 21, 2011


This paper investigates the exposure of industry level portfolios to oil price shocks. Our paper utilizes the Campbell (1991) decomposition of stock returns based on a log-linear approximation to the discounted present value relation while allowing for time varying expected returns. The results from our baseline regressions indicate that there is little sensitivity in industry level portfolios to unexpected movements in oil prices, with the gold, oil & gas and retail industries being the only exception. In contrast, based in the Campbell (1991) decomposition, we identify extensive exposure to oil prices in industry level returns in particular channels. The extent of the exposure is particularly significant for a number of the industries, with positive (negative) permanent implications for gold, and the oil and gas industries (retail and meals, restaurants and hotels).

Keywords: Oil, Industry Stock Returns, Vector autoregression

JEL Classification: E32, C32

Suggested Citation

Bredin, Don and Elder, John, US Oil Price Exposure: The Industry Effects (September 21, 2011). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: or

Don Bredin

University College Dublin (UCD) - Department of Banking & Finance ( email )

School of Business
Blackrock, Co. Dublin, 4


John Elder (Contact Author)

Colorado State University ( email )

Dept of Finance & Real Estate
1272 Campus Delivery
Fort Collins, CO 80523
United States
970-491-2952 (Phone)


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