Oil stocks, risk factors, and tail behavior

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Article number104932
Journal / PublicationEnergy Economics
Volume91
Online published28 Aug 2020
Publication statusPublished - Sep 2020

Abstract

Early studies of oil stocks focus exclusively on the average relationship between oil price changes and individual stock returns. In this paper, we examine how the tail behavior of risk factors affects the tail behavior of individual oil stock returns. We consider a total of 25 widely-used risk factors from the asset pricing literature. These risk factors include 14 stock market factors, three bond market factors, and eight commodity market factors. We find that the excess stock market return, the change in CBOE aggregate market volatility index, the commodity market index return, the change in the prices of oil futures contracts, and the change in CBOE oil ETF volatility index have the largest impact in moving oil stocks tail returns.

Research Area(s)

  • Multivariate conditional exceedance, Oil stocks, Risk factors, Tail risks, Univariate conditional exceedance

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