Oil price shocks and stock returns of oil and gas corporations

•We analyze the impact of oil prices on stock returns of oil and gas corporations (i) covering four decades of oil price fluctuations.•Using both RAC and WTI, we consider four alternative linear and nonlinear oil price specifications.•We find that the linear specification oil price changes have a positive significant impact on real stock returns of oil and gas corporations in the short-run.•We also provided evidence that a nonlinear specification such as oil price increases has a positive impact on stock returns in the short-run.

In this paper we examine the impact of oil price shocks on stock returns of four oil and gas corporations listed on NYSE over the period January 1974 to December 2015. We consider different linear and nonlinear oil price specifications and take into account the structural break date of the year 1986. The novelty evidence supports a significant positive impact of oil price shocks on stock returns in the short-run. We also find that the relationship has become statistically significant during the post-1986 period.