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Impact of Industry-Specific Risk Factors on Stock Returns of the Malaysian Oil and Gas Industry in a Structural Break Environment

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  • Mohammad Enamul Hoque

    (BRAC Business School, BRAC University, Dhaka 1212, Bangladesh)

  • Soo-Wah Low

    (Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi 43600, Selangor, Malaysia)

Abstract

This study examines the impact of industry-specific risk factors such as oil price, gas price, and exchange rate on stock returns of Malaysian oil and gas firms in a structural break environment by employing the break least square approach of Bai and Perron (1998, 2003). Existing studies fall short of providing such empirical evidence. The results document evidence of structural breaks in the relationship between industry risk factors and the stock returns of the oil and gas industry. Industry-specific risk factors are shown to significantly affect the stock returns of oil and gas industry sub-sectors alongside market-based risk factors. The results reveal that the beta values of oil price, gas price, and exchange rate vary across sub-periods hence confirming that exposure of oil and gas stocks to industry risk factors varies over time and across sub-periods. The effects of oil, gas, and exchange rate risk factors also differ across the sub-industry, with impacts and directions largely dependent on the core business activities of the oil and gas sub-industries. The empirical results offer implications for asset managers and investors.

Suggested Citation

  • Mohammad Enamul Hoque & Soo-Wah Low, 2022. "Impact of Industry-Specific Risk Factors on Stock Returns of the Malaysian Oil and Gas Industry in a Structural Break Environment," Mathematics, MDPI, vol. 10(2), pages 1-15, January.
    • Handle: RePEc:gam:jmathe:v:10:y:2022:i:2:p:199-:d:721001
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    References listed on IDEAS

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    Cited by:

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    2. Yingchao Zou & Kaijian He, 2022. "Forecasting Crude Oil Risk Using a Multivariate Multiscale Convolutional Neural Network Model," Mathematics, MDPI, vol. 10(14), pages 1-11, July.

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