Abstract
This study considers return variation across five sectors of the oil and gas industry. Between 2000 and 2020, firms in refining and marketing and exploration and production had the highest daily expected returns. Exploration and production and equipment and services had the greatest variation with equity market risk and was greater than downstream transportation and pipeline and refining and marketing. By sector, firms in refining and marketing and exploration and production had the greatest equity market risk, whereas integrated and transportation and pipeline had the lowest. Across all sectors, firm returns are positively related to size and value effects. Fracking and non-traditional recovery techniques have increased the likelihood of well completion, decreased equity risk, and decreased expected returns across the oil and gas industry.
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Notes
Fama–French factors are constructed using the six value-weighted portfolios that represent size and book-to-market values. Small-minus-big is the daily average on small equity portfolios, less the average nine big stock average returns, the size effect for an equity. High-minus-low is the average return on two value portfolios, less the average return on two growth portfolios, the value effect. Robust-minus-weak is the average returns on two operating profitability portfolios, less average returns on the two weak operating portfolios, a profitability effect. Conservative-minus-weak is two average returns on conservative investment portfolios, less the average returns on two aggressive investment portfolios.
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I appreciate comments from Jim Peach, Roger Olien, Eddie Garza, Jon Finch, and Joe Seibert.
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Carson, S.A. Long-Term Daily Equity Returns Across Sectors of the Oil and Gas Industry, 2000–2019. J Ind Compet Trade 22, 125–143 (2022). https://doi.org/10.1007/s10842-021-00374-4
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DOI: https://doi.org/10.1007/s10842-021-00374-4