Oil price risk in the Eurozone: a sectoral analysis Released On

• Published in: Problems and perspectives in management Vol. 15; no. 3; pp. 108 - 118
• Main Authors: Belhassine, Olfa, Bouzid, Amira Ben
• Format: Journal Article
• Language: English
• Published: LLC “Consulting Publishing Company “Business Perspectives” 2017; ТОВ “Консалтингово-видавнича компанія “Ділові перспективи”
• Subjects: Business Economy / Management; Economy; Energy and Environmental Studies; supersector returns; oil market; breakpoints; Eurozone
• ISSN: 1727-7051; 1810-5467

This study investigates how oil price movements impact the main Eurozone industry supersectors returns. We use a multifactor market model in which we incorporate oil price changes as an additional risk factor. In order to account for possible breaks in the relationship, we use the Bai and Perron (1998, 2003) breakpoints identification methodology. We find evidence of the presence of structural instabilities on the relationship between sector stock returns and oil price changes. Different breakpoints are identified, particularly the 2003 Iraq invasion year, the 2008 subprime crisis and the 2012 Euro debt crisis. Moreover, our results prove that stock return sensitivities to oil prices are time varying and sector dependent. Besides, the subprime financial crisis appears to induce a significantly positive effect on the oil-stock market nexus. However, the Euro debt crisis has a mostly negative effect. The other identified breakpoints do not seem to have any significant effect on the oil stock market nexus.