The Effect of Oil Price Shocks on Oil Related Shipping Sectors

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The Effect of Oil Price Shocks on Oil Related Shipping Sectors

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Title: The Effect of Oil Price Shocks on Oil Related Shipping Sectors
An Event Study
Author: Evans, Christian; Patricksson, Johan
Abstract: The purpose of this thesis is to assess how deterministic both positive and negative daily shocks are to oil related shipping segments. However, the effects of oil price changes on these industries are twofold. Firstly, as the shipping industry is a major consumer of oil-based energy, the price of oil greatly affects the overall profitability of voyages. Secondly, the activity levels in many shipping industries are vastly dependent on the production of oil. Furthermore, as crude oil has become the most traded commodity in the world, scholars in finance and economics have studied the effects of its changes on returns of various indices and independent companies. Consequently, we want to extend on the existing body of research by investigate abnormalities in the returns achieved from daily shocks of the crude oil prices, and its effect on shipping segments related to the oil value chain. We will carry out an extensive investigation by measuring the short-term value effect of daily shocks in crude oil prices, for companies within the drilling-, Offshore Support Vessel- (OSV), crude oil-, and product tanker segments. Our dataset consists of a total of 43 publicly listed companies on different stock exchanges from 2006-2015. The results are summarized as follows: (1) Though there are differences across the companies included in our analysis, daily shocks in crude oil prices seems to create fluctuations in our portfolio of shipping firms in general. (2) The drilling-, OSV- and crude tanker segments react in a similar pattern as a result of a negative shock in crude oil price, though only the drilling and OSV segments yield statistically significant results. (3) Even though we find a pattern of positive results for drilling, OSV and crude oil tankers during positive shocks, the results lack significance and are thus considered to be less conclusive. (4) There seems to be no relation from shocks in the crude oil prices on the stock returns of product tanker firms. The findings are consistent with previous research and our arguments for conducting this thesis, where a generalization of crude oil prices across the maritime industry will yield conflicting results compared to a segmentation of the industry. Our findings enhance the understanding of oil price shocks, and its effect on asset prices of firms within shipping industries, and should be of interest to both scholars and market participants.
URI: http://hdl.handle.net/10417/6208
Date: 2017-02-01
Pages: 169 s.
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