Impact of fuel price fluctuations on airline stock returns

This paper analyzes the impact of changes in fuel price on the equity returns of airlines associated with International Air Transport Association (IATA), as listed on the stock market. While it is simple to comprehend that airline price stock returns are related to fuel price variations, it is not as simple to establish whether this relationship is direct or indirect. It could be assumed to be indirect given the high influence of fuel price on airline costs. However, when taking into account the market inertia theory and the paradigm that increases in oil price are indicators of economic growth, these relations could also be assumed to be direct.

[1]  Campbell R. Harvey,et al.  Sources of Risk and Expected Returns in Global Equity Markets , 1994 .

[2]  Susan Sunila Sharma,et al.  New evidence on oil price and firm returns , 2011 .

[3]  John Ozment,et al.  Economies of scale in the US airline industry , 2013 .

[4]  Perry Sadorsky.  Oil price shocks and stock market activity , 1999 .

[5]  B. Scholtens,et al.  Oil price shocks and European industries , 2012 .

[6]  N. Ceylan,et al.  The Impact of Oil Price Shocks on the Economic Growth of Selected MENA1 Countries , 2010 .

[7]  Benoît Sévi,et al.  Forecasting the volatility of crude oil futures using intraday data , 2014, Eur. J. Oper. Res..

[8]  Brian Pearce,et al.  The state of air transport markets and the airline industry after the great recession , 2012 .

[9]  J. Cuñado,et al.  Oil price shocks and stock market returns: Evidence for some European countries , 2014 .

[10]  U. Soytaş,et al.  Volatility spillover from world oil spot markets to aggregate and electricity stock index returns in Turkey , 2011 .

[11]  Álvaro Costa,et al.  Airlines performance in the new market context: A comparative productivity and efficiency analysis. , 2008 .

[12]  James D. Hamilton.  Oil and the Macroeconomy since World War II , 1983, Journal of Political Economy.

[13]  Lu Zhang,et al.  Interpreting the crude oil price movements: Evidence from the Markov regime switching model , 2015 .

[14]  Xiaoguang Yang,et al.  Response pattern of stock returns to international oil price shocks: From the perspective of China’s oil industrial chain , 2017 .

[15]  Perry Sadorsky,et al.  Oil price risk and emerging stock markets , 2006 .

[16]  Kin Keung Lai,et al.  Global economic activity and crude oil prices: A cointegration analysis , 2010 .

[17]  José Ramos Pires Manso,et al.  How crude oil consumption impacts on economic growth of Sub-Saharan Africa? , 2013 .

[18]  Perry Sadorsky,et al.  Oil prices, exchange rates and emerging stock markets , 2012 .

[19]  Alexander Josiassen,et al.  European vs. U.S. airlines: Performance comparison in a dynamic market , 2012 .

[20]  Ying Fan,et al.  How Does Oil Price Volatility Affect Non-Energy Commodity Markets? , 2012 .

[21]  F. Ciliberto,et al.  Bankruptcy and Product-Market Competition: Evidence from the Airline Industry , 2012 .

[22]  Charles M. Jones,et al.  OIL AND THE STOCK MARKETS , 1996 .

[23]  W. Sharpe.  CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK* , 1964 .

[24]  Robert W. Faff,et al.  Does oil move equity prices? A global view , 2008 .

[25]  Kuang-Liang Chang,et al.  Volatility regimes, asymmetric basis effects and forecasting performance: An empirical investigation of the WTI crude oil futures market , 2012 .

[26]  Paresh Kumar Narayan,et al.  Has oil price predicted stock returns for over a century , 2015 .

[27]  Sajal Ghosh,et al.  Examining crude oil price – Exchange rate nexus for India during the period of extreme oil price volatility , 2011 .

[28]  S. Mohanty,et al.  Oil Risk Exposure: The Case of the U.S. Oil and Gas Sector , 2011 .

[29]  H. An,et al.  Do oil price asymmetric effects on the stock market persist in multiple time horizons , 2017 .

[30]  J. Lintner.  THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS , 1965 .

[31]  Nicholas Apergis,et al.  Do Structural Oil-Market Shocks Affect Stock Prices? , 2009 .

[32]  Knut Anton Mork,et al.  Macroeconomic Responses to Oil Price Increases and Decreases in Seven OECD Countries , 1994 .

[33]  Jungseok Park,et al.  Oil price shocks and stock markets in the U.S. and 13 European countries , 2008 .

[34]  Knut Anton Mork,et al.  Oil and the Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results , 1989, Journal of Political Economy.

[35]  N. México.  La crisis de los precios del petróleo y su impacto en los países centroamericanos , 2009 .

[36]  Seema Narayan,et al.  Modelling the impact of oil prices on Vietnam’s stock prices , 2010 .

[37]  S. Mohanty,et al.  Oil price risk exposure: The case of the U.S. Travel and Leisure Industry , 2014 .

[38]  A. Assaf,et al.  Are U.S. airlines really in crisis , 2009 .

[39]  Duc Khuong Nguyen,et al.  Oil prices, stock markets and portfolio investment: Evidence from sector analysis in Europe over the last decade , 2010 .

[40]  F. Black.  Capital Market Equilibrium with Restricted Borrowing , 1972 .

[41]  Elyas Elyasiani,et al.  Oil Price Shocks and Industry Stock Returns , 2010 .

[42]  R. Brooks,et al.  Oil prices and transport sector returns: an international analysis , 2009 .

[43]  L. Kilian,et al.  The Impact of Oil Price Shocks on the U.S. Stock Market , 2007 .

[44]  G. Filis,et al.  Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries , 2011 .

[45]  Philippe Jorion,et al.  Firm Value and Hedging: Evidence from U.S. Oil and Gas Producers , 2006 .

[46]  Perry Sadorsky,et al.  Oil Prices, Exchange Rates and Emerging Stock Markets , 2011 .

[47]  Ronald W. Masulis,et al.  Energy Shocks and Financial Markets , 1996 .

[48]  V. Mignon,et al.  Oil prices and economic activity: An asymmetric cointegration approach , 2008 .

[49]  R. Aggarwal,et al.  Oil price shocks and transportation firm asset prices , 2012 .

[50]  Siew Hoon Lim,et al.  Hedging jet fuel price risk: The case of U.S. passenger airlines , 2015, Journal of Air Transport Management.

[51]  Carlos Pestana Barros,et al.  An evaluation of European airlines’ operational performance , 2009 .

[52]  Li Yang,et al.  Oil price shocks and stock market activities: Evidence from oil-importing and oil-exporting countries , 2013 .

[53]  Yue-Jun Zhang,et al.  Speculative trading and WTI crude oil futures price movement: An empirical analysis , 2013 .