Abstract
Purpose – This paper aims to examine the impact of crude oil prices on Australian industry stock returns. With rising energy prices, it is important to consider oil as a pricing factor in asset pricing models.Design/methodology/approach – Multifactor static and dynamic models consider crude oil and other macroeconomic factors as pricing factors in industry excess returns from January 1980 to August 2006. The macroeconomic factors comprise the market portfolio, oil prices, exchange rates and the term premium. The industries consist of banking, diversified financials, energy, insurance, media, property trusts, materials, retailing and transportation.Findings – Oil prices are an important determinant of returns in the banking, energy, materials, retailing and transportation industries. The findings also suggest oil price movements are persistent. Nonetheless, the proportion of variation in excess returns explained by the contemporaneous and lagged oil prices appears to have declined during the sample period....
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