Oil price shocks and transportation firm asset prices

The transportation sector is a major user of oil-based energy. Even as oil prices continue to fluctuate greatly, the impact of oil price changes on transportation firms has heretofore not been adequately examined. This paper fills this gap, documenting important new findings based on analysis of over two decades of daily data on large changes in oil prices (oil price shocks). First, while transportation firm returns are influenced negatively by oil price increases, risks are increased more by oil price declines. Second, firm characteristics are important with the market-to-book ratio being the most important firm characteristic, and ROA, firm size, and the prior run up in prices are also important in influencing oil price related returns, betas, variances, and trading volumes. Third, in the S&P transportation sub-sector, industry concentration is negatively related to returns, oil price risk, and trading volume, and asymmetrically related to returns and market betas. These new findings enhance our understanding of the asset price impact of oil price shocks and should be of much interest to scholars, corporate executives, money managers, regulators, and policy makers.

► Impact of oil price shocks on transportation firms has heretofore not yet been adequately examined. ► Returns influenced negatively by oil price increases; risks increased by oil price declines. ► Firm size, MBRs, and ROA influence oil price impact on returns, betas, and volumes. ► Transportation industry concentration is negatively related to oil price risk and trading volume. ► Findings of interest to scholars, executives, money managers, regulators, and policy makers.