Exploration Risk in International Oil and Gas Shareholder Returns

22 Pages Posted: 28 Nov 2017

See all articles by Bård Misund

Bård Misund

University of Stavanger - Business School

Klaus Mohn

Statoil

Marius Sikveland

University of Stavanger

Date Written: November 27, 2017

Abstract

This paper focuses upon the oil and gas industry, examining the association between exploration activity risk and company shareholder returns. Using monthly returns data from 189 oil and gas companies between 1993 and 2013, we supplement the Fama – French approach with an industry-specific fundamental factor in order to capture company exposure to oil and gas exploration risk. Our results indicate that exploration risk contributes significantly to oil company excess returns throughout the period of our study. Moreover, we are unable to uncover asymmetric effects related to positive/negative oil price changes. The effects of the interaction between the variables of exploration and oil price are equally difficult to uncover.

Keywords: oil and gas, stock returns, asset pricing, oil price, risk factors, exploration

Suggested Citation

Misund, Bård and Mohn, Klaus and Sikveland, Marius, Exploration Risk in International Oil and Gas Shareholder Returns (November 27, 2017). Journal of Energy Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3077958

Bård Misund (Contact Author)

University of Stavanger - Business School ( email )

PB 8002
Stavanger, 4036
Norway

Klaus Mohn

Statoil ( email )

Forusbeen 50
N-4035 Stavanger
Norway

Marius Sikveland

University of Stavanger ( email )

PB 8002
Stavanger, 4036
Norway

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