Publication: Asymmetric long-run effects in the oil industry
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2012-02-13
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Abstract
This paper analyzes long term dependence between the market value of oil firms and oil prices. Applying nonlinear cointegration, the results show that in the long-run oil price hikes and falls show different adjustments to the equilibrium. Using a momentum threshold autoregressive model (MTAR), we find that for oil producing firms, the adjustment is faster for oil price falls than for oil price hikes, but we do not find a difference on the speed of adjustment for oil integrated firms. Moreover, testing for asymmetric cointegration, we also find that oil price falls impact substantially the value of oil producers and integrated firms, but the same is not found for oil price hikes. Overall, the evidence suggests that firm value stays above equilibrium relationship when there are oil price hikes.
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Asymmetric cointegration, ECM models, MTAR models, Oil prices, Oil industry