What drives volatility of the US oil and gas firms?
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F21%3A00119319" target="_blank" >RIV/00216224:14560/21:00119319 - isvavai.cz</a>
Result on the web
<a href="https://www.sciencedirect.com/science/article/pii/S014098832100270X" target="_blank" >https://www.sciencedirect.com/science/article/pii/S014098832100270X</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.eneco.2021.105367" target="_blank" >10.1016/j.eneco.2021.105367</a>
Alternative languages
Result language
angličtina
Original language name
What drives volatility of the US oil and gas firms?
Original language description
We study how the day-ahead stock price volatility of 15 firms that are S&P 500 constituents in the Oil & Gas Exploration & Production sub-industry is driven through six volatility factors represented by realized volatilities, namely, (i) firms’ own volatility, (ii) industry market volatility, (iii) local (U.S.) market volatility, (iv) world equity market volatility, (v) oil price volatility, and (vi) natural gas price volatility. Existing studies have reported results based on analysis of one or few volatility components, but given the high dependence among volatility factors, this might bias (overestimate) the true importance of each of the volatility factors on the price fluctuation of stocks in the Oil & Gas Exploration & Production sub-industry. To take into account this inter-relatedness of volatility factors, we study all volatility factors together. Using augmented heterogeneous autoregressive (HAR) models and dynamic model averaging, our analysis shows that market volatility is most influential, followed by a stock’s own volatility and industry level volatility. The role of the volatility of the oil market is of lesser importance, while the volatility of the world equity market does not appear to contain incremental information useful for predicting the volatility of firms in the Oil & Gas Exploration & Production sub-industry. The role of the natural gas market is specific. An in-sample analysis suggests a negative relationship between firm-level volatility and volatility on the natural gas market. However, in an out-of-sample framework, the volatility of the natural gas market appears to be unrelated to firm-level volatility. Dynamic model averaging further suggests that the market and industry factors are time-varying. These findings have implications for financial risk management, as we show that in an out-of-sample framework, HAR models augmented with volatility factors outperform the plain HAR model by up to a 3.88% increase in volatility forecast accuracy.
Czech name
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Czech description
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Classification
Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50206 - Finance
Result continuities
Project
<a href="/en/project/GA18-05829S" target="_blank" >GA18-05829S: Forecasting Volatility in Emerging Financial Markets</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Others
Publication year
2021
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
Energy Economics
ISSN
0140-9883
e-ISSN
1873-6181
Volume of the periodical
100
Issue of the periodical within the volume
August
Country of publishing house
NL - THE KINGDOM OF THE NETHERLANDS
Number of pages
10
Pages from-to
1-10
UT code for WoS article
000694892100034
EID of the result in the Scopus database
2-s2.0-85108118946