Empirical Economics

, Volume 53, Issue 3, pp 891–926 | Cite as

Oil price effects over individual Portuguese stock returns

  • Rui F. Teixeira
  • Mara Madaleno
  • Elisabete S. Vieira
Article
First Online:
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Accepted:

Abstract

During the last decades, the world energy dependence increased significantly. Understanding how companies depend on oil prices is essential, especially for countries highly dependent or importers. The work intends to investigate the relationship between oil price changes and Portuguese listed companies’ returns. Using the generalized autoregressive conditional heteroskedasticity model, we conclude that nearly 20 % of the companies are significantly affected by oil prices, finding also evidence that these effects are asymmetric, depending on the company’s current situation in the market (result attributed to the lack of liquidity and the small number of firms included within the sample). There exists some differences among economic sectors in the way they are impacted by oil price changes, although not so much significant. The results show that the bigger the company, the higher the probability of being significantly affected by oil price changes. Results suggest that lagged oil price positive shocks increase Portuguese companies’ returns, by opposition to the current oil price change. Findings highlight the key role played by aggregate demand-side oil price shocks over the financial economic activity, showing sector and individual companies’ differences, thus inducing the possibility of results being highly dependent over the economic context faced by the country under analysis, that firms are more sensitive to oil prices when the equity market is busiest and that oil price increases affect companies returns in a negative way, but price decreases cause more positive than negative effects over company returns.

Keywords

Oil prices Returns Sector analysis Asymmetric effects Threshold effect 

JEL Classification

C22 G11 Q40 
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Notes

Acknowledgments

This work was financially supported by the research unit on Governance, Competitiveness and Public Policy (Project POCI-01-0145-FEDER-006939), funded by FEDER funds through COMPETE2020—Programa Operacional Competitividade e Internacionalização (POCI)—and by national funds through FCT-Fundação para a Ciência e a Tecnologia. We would like to thank the anonymous referees for their useful comments that helped us improving the present article. Any shortcomings are our sole responsibility.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  • Rui F. Teixeira
    • 1
  • Mara Madaleno
    • 1
    • 2
  • Elisabete S. Vieira
    • 2
    • 3
  1. 1.DEGEIT - Department of Economics, Management, Industrial Engineering and TourismUniversity of AveiroAveiroPortugal
  2. 2.GOVCOPP – Research Unit of Investigation in Governance, Competitiveness and Public FinancesAveiroPortugal
  3. 3.ISCA – Instituto Superior de Contabilidade e AdministraçãoUniversity of AveiroAveiroPortugal

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