Oil price risk and the Australian stock market |
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| Affiliation: | 1. USEK Business School, Holy Spirit University of Kaslik, PO BOX 446, Jounieh, Lebanon;2. Plymouth Business School, Plymouth University, Plymouth, UK;3. Department of Economics and Finance, United Arab Emirates University, Al-Ain, United Arab Emirates;1. Department of Economics and Finance, College of Economics and Political Science, Sultan Qaboos University, Muscat, Oman;2. Faculty of Business Administration, Bilkent University, Ankara 06800, Turkey;3. Department of Business Administration, Pusan National University, Busan 609-735, Republic of Korea;4. School of Commerce, University of South Australia, Australia;1. School of International Business Administration, Shanghai University of Finance and Economics, 777 Guoding Road, Shanghai, China;2. Division of Economics and International Trade, Kangwon National University, 1 Kangwondaehak-gil, Chuncheon-si, Gangwon-do 200-701, Korea;3. School of Economics, Chung-Ang University, 84 Heukseok-Ro, Dongjak-Gu, Seoul, Korea;1. Bournemouth University, Department of Accounting, Finance and Economics, Executive Business Centre, 89 Holdenhurst Road, BH8 8EB Bournemouth, United Kingdom;2. Department of Economics and Regional Development, Panteion University of Social and Political Sciences, 136 Syggrou Avenue, 17671, Greece;3. Postgraduate Department of Business Administration, Hellenic Open University, Aristotelous 18, 26 335, Greece |
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| Abstract: | The primary aim of this paper is to investigate the sensitivity of Australian industry equity returns to an oil price factor over the period 1983–1996. The paper employs an augmented market model to establish the sensitivity. The key findings are as follows. First, a degree of pervasiveness of an oil price factor, beyond the influence of the market, is detected across some Australian industries. Second, we propose and find significant positive oil price sensitivity in the Oil and Gas and Diversified Resources industries. Similarly, we propose and find significant negative oil price sensitivity in the Paper and Packaging, and Transport industries. Generally, we find that long-term effects persist, although we hypothesize that some firms have been able to pass on oil price changes to customers or hedge the risk. The results have implications for management in these industries and policy makers and enhance our understanding of the “Dutch disease.” |
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