Title: Energy industry's market value and oil price
Authors: Helena Veiga - BRU-IUL (Instituto Universitario de Lisboa) (Portugal)
Sofia Ramos - ESSEC Business School (France) [presenting]
Abstract: The long-run equilibrium between the market value of energy firms and oil prices is analyzed. Using a sample of industry indexes from Canada, France, Japan, the UK and the US, we find that UK oil producers and US oil integrated industry firms are jointly cointegrated with oil and stock market values. We find cointegration with the stock market value for French integrated firms and UK and US renewable energy firms. Further analysis support causality relations between oil and stock market changes and the value of energy firms. For the others industry indexes of our sample, we only find short term effects from shocks of oil, stock market prices and exchange rates. For renewable energy firms the effects of oil shocks are mixed that nevertheless are not statistically significant. The model provides us a long-term relationship that is then tested outsample, presenting a good fit, in particular for US integrated firms. Overall, the results confirm that oil and stock markets are drivers of the market value of the UK and the US energy industry; for the other country-industries we find a puzzingly absence of relation with oil and stock markets. The results have implications for investors and managers of firms in energy sector.