Firm age and crude oil returns: Stock price sensitivity of oil-producing and consuming companies

Figures & data

Table 1. Crude oil price and value-weighted return of oil and gas extractives firms

Panel A: Daily NYMEX/WTI Futures Price Level ($/Bbl)
Year	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
Min	33.87	33.98	68.01	75.67	77.69	86.68	53.27	34.73	26.21	42.53	42.53	46.54
Max	145.29	81.37	91.51	113.93	109.77	110.53	107.26	61.43	54.06	60.42	76.41	66.30
Mean	99.75	62.09	79.61	95.11	94.15	98.05	92.91	48.79	43.40	50.80	64.81	57.07
Std. Dev.	28.42	13.36	5.19	8.08	7.68	5.43	13.37	6.81	6.72	3.88	6.81	3.70
Panel B: Daily Value-Weighted Stock Price Return of the Oil and Gas Extractives (%)
Year	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
Min	-15.7%	-10.6%	-5.5%	-8.9%	-5.9%	-5.0%	-7.2%	-8.6%	-6.2%	-3.9%	-5.4%	-4.8%
Max	24.3%	12.1%	6.5%	8.2%	6.4%	4.9%	6.3%	15.2%	6.5%	3.7%	5.6%	8.4%
Mean	-0.1%	0.2%	0.2%	-0.1%	0.1%	0.0%	-0.1%	-0.1%	0.1%	0.1%	0.0%	0.1%
Std. Dev.	4.9%	3.1%	2.1%	2.6%	1.8%	1.4%	1.6%	2.4%	2.1%	1.1%	2.1%	1.6%

Panel A shows the summary of the daily quoted price level (in dollar) of the nearest-to-delivery NYMEX/WTI futures contract during each year between January 2008 and December 2019. Panel B shows the summary of the value-weighted daily stock price return of the firms in the oil and gas extraction sub-sector during the same period.

Figure 1. Crude oil price and market capitalization of oil and gas extractives firms

The left axis of the chart indicates the daily level of the aggregated market capitalizations (in billions of dollars) consisting of the firms in the oil and gas extraction sub-sector between January 2008 and December 2019. Market capitalization for each firm is determined as the number of common shares outstanding multiplied by the share price. The right axis indicates the daily price level (in dollars) of the nearest-to-delivery NYMEX/WTI futures contract during the same period.

Table 2. Summary of firm-specific characteristics by group

Panel A: Oil and gas extraction
	Number of firms	Min	Max	Mean	Std. Dev.
Firm’s age	56	13	95	30.15	19.16
Market capitalization ($ in million)	56	5	82,100	9,050	15,200
Stock liquidity (shares in thousand)	56	2	23,500	2,672	3,783
Beta on market return	56	0.419	2.036	1.353	0.365
Panel B: Petroleum, electric and gas utilities, and transportation
	Number of firms	Min	Max	Mean	Std. Dev.
Firm’s age	119	13	95	44.29	24.64
Market capitalization ($ in million)	119	14	375,000	14,700	39,500
Stock liquidity (shares in thousand)	119	3	18,300	1,820	2,644
Beta on market return	119	0.145	2.118	0.924	0.390
Panel C: Securities and commodity contracts intermediation
	Number of firms	Min	Max	Mean	Std. Dev.
Firm’s age	68	13	83	25.90	14.02
Market capitalization ($ in million)	68	21	74,900	6,630	13,400
Stock liquidity (shares in thousand)	68	6	16,600	1,584	3,329
Beta on market return	68	0.319	1.984	1.216	0.373

Statistics are based only on the firms that have stock price information for the entire sample period. Firm’s age is the number of years firm i had been listed in CRSP as of 2019 or at the time when the firm was delisted from CRSP, and its minimum value is 13. The other values are averages during the sample period, January 2007—December 2019: Market capitalization is the number of common shares outstanding multiplied by the daily share price; Stock liquidity indicates firm i’s daily transaction volume; and Beta on market return is firm i’s beta to the CRSP value-weighted stock returns.

Table 3. Correlations and variance inflation factors of firm characteristics

Panel A: Oil and gas extraction
Variable	Firm’s age	Size (ln)	Liquidity (ln)	Beta	VIF
Firm’s age	1				1.30
Firm’s size (ln)	0.312	1			2.92
Stock liquidity (ln)	0.188	0.787	1		1.30
Beta	-0.231	0.357	0.406	1	1.40
Panel B: Petroleum, electric and gas utilities, and transportation
Variable	Firm’s age	Size (ln)	Liquidity (ln)	Beta	VIF
Firm’s age	1				1.55
Firm’s size (ln)	0.433	1			3.92
Stock liquidity (ln)	0.342	0.821	1		3.92
Beta	-0.459	-0.201	0.077	1	1.62
Panel C: Securities and commodity contracts intermediation
Variable	Firm’s age	Size (ln)	Liquidity (ln)	Beta	VIF
Firm’s age	1				1.03
Firm’s size (ln)	0.034	1			3.53
Stock liquidity (ln)	-0.059	0.835	1		3.50
Beta	0.034	0.540	0.529	1	1.46

The table shows the correlation coefficients and the variance inflation factors (VIFs) calculated based on the data between January 2007 and December 2019. Firm’s age is the number of years firm i had been listed in CRSP as of 2019 or at the time when the firm was delisted from CRSP. Firm’s size is the natural logarithm of firm i’s market capitalization (number of common shares outstanding multiplied by the daily share price). Stock liquidity indicates the natural logarithm of firm i’s daily transaction volume. Beta on market return is firm i’s beta to the CRSP value-weighted stock returns.

Table 4. Unit root tests on crude oil futures prices, S&P 500 index, and select stocks

			ADF Test		PP Test
Index/Firm	Case	Obs.	Levels	Returns	Levels	Returns
NYMEX/WTI futures price	no trend	676	-2.000	-18.620**	-2.119	-26.287**
	w/ trend	676	-2.565	-18.629**	-2.645	-26.282**
S&P 500 Index	no trend	676	0.800	-18.430**	0.922	-28.384**
	w/ trend	676	-2.306	-18.422**	-2.249	-28.370**
Harvest Oil & Gas Corp.	no trend	676	-0.523	-18.750**	-0.597	-28.018**
	w/ trend	676	-1.378	-18.994**	-1.414	-28.441**
Exxon Mobil Corp.	no trend	676	-2.795	-20.396**	-2.736	-28.218**
	w/ trend	676	-2.727	-20.403**	-2.663	-28.233**
American Electric Power Co.	no trend	676	0.887	-19.224**	0.898	-27.389**
	w/ trend	676	-1.632	-19.286**	-1.662	-27.444**
SkyWest, Inc.	no trend	676	0.399	-17.606**	0.519	-26.343**
	w/ trend	676	-1.466	-17.667**	-1.328	-26.411**

The unit-root test is conducted with weekly price returns between January 2007 and December 2019. The values shown are the augmented Dickey-Fuller (ADF) and the Phillips-Perron (PP) test statistics both determined with the lag length of 1. The levels of S&P 500 Index indicates the total market values. The levels of the other variables are the quoted prices. The asterisks represent the significance level of 1% (**) and 5% (*).

Table 5. Firm characteristics and stock sensitivity to oil price returns (2007–2019)

Panel A: Oil and gas extraction
DV.: Return of stock i	(1)	(2) Firm age	(3) Firm size	(4) Liquidity	(5) Sys. risk
S&P 500 Index return	0.282 (7.23)**	0.282 (5.57)**	0.283 (5.58)**	0.283 (5.58)**	0.282 (5.57)**
Oil return	0.711 (71.23)**
Oil return × Low		0.816 (14.39)**	0.676 (11.40)**	0.627 (13.04)**	0.577 (11.46)**
Oil return × Mid		0.707 (16.72)**	0.816 (18.16)**	0.815 (17.46)**	0.660 (31.62)**
Oil return × High		0.607 (16.12)**	0.636 (20.30)**	0.700 (15.19)**	0.910 (23.80)**
Constant	-0.004 (-2.40)*	-0.004 (-4.02)**	-0.004 (-4.11)**	-0.004 (-4.07)**	-0.004 (-4.05)**
Number of firms	56	56	56	56	56
Fixed effects	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.127	0.128	0.128	0.128	0.131
Wald test: β(Low) = β(High)		9.45 (0.003)**	0.36 (0.552)	1..22 (0.274)	28.33 (0.000)**
Panel B: Petroleum, electric and gas utilities, and transportation
DV.: Return of stock i	(1)	(2) Firm age	(3) Firm size	(4) Liquidity	(5) Sys. risk
S&P 500 Index return	0.396 (22.69)**	0.395 (14.16)**	0.396 (14.17)**	0.396 (14.17)**	0.396 (14.19)**
Oil price return	0.199 (44.66)**
Oil return × Low		0.270 (8.42)**	0.249 (7.11)**	0.204 (7.85)**	0.070 (5.72)**
Oil return × Mid		0.186 (6.69)**	0.163 (7.62)**	0.201 (6.70)**	0.219 (9.81)**
Oil return × High		0.135 (5.90)**	0.185 (6.47)**	0.192 (5.97)**	0.312 (8.80)**
Constant	-0.001 (-1.69)*	-0.001 (-2.73)**	-0.001 (-2.75)**	-0.001 (-2.74)**	-0.001 (-2.73)**
Number of firms	119	119	119	119	119
Fixed effects	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.036	0.038	0.037	0.036	0.042
Wald test: β(Low) = β(High)		11.54 (0.001)**	1.93 (0.167)	0.09 (0.762)	41.59 (0.000)**
Panel C: Securities and commodity contracts intermediation
DV.: Return of stock i	(1)	(2) Firm age	(3) Firm size	(4) Liquidity	(5) Sys. risk
S&P 500 Index return	0.570 (23.40)**	0.570 (13.10)**	0.570 (13.10)**	0.570 (13.10)**	0.570 (13.10)**
Oil price return	0.276 (44.25)**
Oil return × Low		0.267 (8.28)**	0.267 (10.32)**	0.242 (10.11)**	0.229 (5.99)**
Oil return × Mid		0.290 (11.29)**	0.273 (7.63)**	0.266 (10.73)**	0.284 (13.98)**
Oil return × High		0.272 (12.50)**	0.288 (17.34)**	0.322 (10.38)**	0.317 (21.78)**
Constant	-0.005 (-4.46)**	-0.005 (-4.67)**	-0.005 (-4.67)**	-0.005 (-4.69)**	-0.005 (-4.69)**
Number of firms	68	68	68	68	68
Fixed effects	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.064	0.064	0.064	0.064	0.064
Wald test: β(Low) = β(High)		0.02 (0.898)	0.48 (0.488)	4.18 (0.044)*	4.61 (0.035)*

The values shown are the coefficient estimates of panel regression models based on weekly data between January 2007 and December 2019 while test statistics are given in parentheses. The asterisks represent the significance level of 1% (**) and 5% (*). Standard errors are clustered at the firm dimension. S&P 500 Index return and Oil return are the value-weighted return of the S&P 500 Index and the return of NNYMEX crude oil futures price, respectively. Each of the interaction terms includes a tercile dummy variable generated based on whether the firm is located in the top one-third (Low), the middle one-third (Mid), or the bottom one-third (High) within a sample based on one of the following characteristics: the number of years firm i has been listed in CRSP (Firm age); a firm’s average market capitalization during the period (Firm size); a firm’s average daily transaction volume during the period (Liquidity); and a firm’s beta to the CRSP value-weighted stock returns (Sys. risk). All the regressions include firm-specific and fiscal-year fixed effects. The table also reports the statistics of the Wald test of equality of coefficients for (Oil return × Low) and (Oil return × High) with p-values in parentheses.

Table 6. Firm characteristics and stock sensitivity to oil price returns (2007–2009)

Panel A: Oil and gas extraction
DV.: Return of stock i	(1)	(2) Firm age	(3) Firm size	(4) Liquidity	(5) Sys. risk
S&P 500 Index return	0.084 (1.68)	0.083 (1.63)	0.083 (1.63)	0.083 (1.63)	0.083 (1.63)
Oil return	0.748 (43.07)**
Oil return × Low		0.835 (17.29)**	0.817 (13.62)**	0.713 (14.21)**	0.613 (18.65)**
Oil return × Mid		0.769 (18.35)**	0.768 (21.04)**	0.860 (18.04)**	0.700 (20.17)**
Oil return × High		0.630 (16.01)**	0.657 (22.11)**	0.672 (21.62)**	0.934 (18.31)**
Constant	-0.001 (-0.19)	-0.001 (-0.30)	-0.001 (-0.30)	-0.001 (-0.30)	-0.001 (-0.30)
Number of firms	115	115	115	115	115
Fixed effects	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.180	0.182	0.181	0.182	0.186
Wald test: β(Low) = β(High)		11.22 (0.001)**	5.94 (0.016)*	0.52 (0.472)	29.31 (0.000)**
Panel B: Petroleum, electric and gas utilities, and transportation
DV.: Return of stock i	(1)	(2) Firm age	(3) Firm size	(4) Liquidity	(5) Sys. risk
S&P 500 Index return	0.309 (10.65)**	0.309 (8.78)**	0.309 (8.78)**	0.309 (8.78)**	0.309 (8.78)**
Oil price return	0.218 (21.52)**
Oil return × Low		0.309 (6.78)**	0.248 (5.55)**	0.269 (8.07)**	0.130 (7.19)**
Oil return × Mid		0.193 (9.64)**	0.188 (6.76)**	0.194 (6.05)**	0.223 (9.80)**
Oil return × High		0.141 (7.35)**	0.221 (10.52)**	0.189 (5.85)**	0.301 (6.40)**
Constant	0.004 (1.17)	0.004 (2.66)*	0.004 (2.66)*	0.004 (2.66)*	0.004 (2.66)*
Number of firms	202	202	202	202	202
Fixed effects	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.044	0.045	0.044	0.044	0.047
Wald test: β(Low) = β(High)		11.60 (0.001)**	0.40 (0.531)	2.96 (0.086)	11.49 (0.001)**
Panel C: Securities and commodity contracts intermediation
DV.: Return of stock i	(1)	(2) Firm age	(3) Firm size	(4) Liquidity	(5) Sys. risk
S&P 500 Index return	0.459 (8.36)**	0.459 (7.21)**	0.459 (7.21)**	0.459 (7.21)**	0.459 (7.21)**
Oil price return	0.349 (18.21)**
Oil return × Low		0.337 (5.65)**	0.286 (4.44)**	0.288 (5.44)**	0.316 (4.81)**
Oil return × Mid		0.413 (6.19)**	0.398 (7.90)**	0.293 (6.27)**	0.288 (8.24)**
Oil return × High		0.319 (10.17)**	0.364 (7.47)**	0.467 (7.64)**	0.443 (7.71)**
Constant	0.010 (1.38)**	0.010 (3.33)**	0.010 (3.33)**	0.010 (3.33)**	0.010 (3.33)**
Number of firms	94	94	94	94	94
Fixed effects	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.067	0.068	0.068	0.070	0.069
Wald test: β(Low) = β(High)		0.07 (0.795)	0.97 (0.326)	5.07 (0.026)*	2.12 (0.148)

The values shown are the coefficient estimates of panel regression models based on weekly data between December 2007 and June 2009 while test statistics are given in parentheses. The asterisks represent the significance level of 1% (**) and 5% (*). Standard errors are clustered at the firm dimension. S&P 500 Index return and Oil return are the value-weighted return of the S&P 500 Index and the return of NNYMEX crude oil futures price, respectively. Each of the interaction terms includes a tercile dummy variable generated based on whether the firm is located in the top one-third (Low), the middle one-third (Mid), or the bottom one-third (High) within a sample based on one of the following characteristics: the number of years firm i has been listed in CRSP (Firm age); a firm’s average market capitalization during the period (Firm size); a firm’s average daily transaction volume during the period (Liquidity); and a firm’s beta to the CRSP value-weighted stock returns (Sys. risk). All the regressions include firm-specific and fiscal-year fixed effects. The table also reports the statistics of the Wald test of equality of coefficients for (Oil return × Low) and (Oil return × High) with p-values in parentheses.

Table 7. Firm characteristics and lagged effect of oil prices to stock returns (2007–2019)

Panel A: Oil and Gas Extraction
	Subgroup (1)			Subgroup (2)			Subgroup (3)
H0: Oil ⇏ Stock	K	${\overline{\text{Z}}}_{\text{N},\text{T}}$	${\stackrel{\sim }{\text{Z}}}_{N,T}$	K	${\overline{\text{Z}}}_{\text{N},\text{T}}$	${\stackrel{\sim }{\text{Z}}}_{N,T}$	K	${\overline{\text{Z}}}_{\text{N},\text{T}}$	${\stackrel{\sim }{\text{Z}}}_{N,T}$
Firm age	1	0.458	0.450	1	0.393	0.385	1	-1.075	-1.075
Firm size	1	1.462	1.448	1	-0.438	-0.442	1	-0.938	-0.939
Stock liquidity	1	2.037*	2.020*	1	-1.140	-1.140	1	-1.162	-1.162
Systematic risk	1	2.100*	2.083*	1	-1.109	-1.109	1	-1.224	-1.224
Panel B: Petroleum, electric and gas utilities, and transportation
	Subgroup (1)			Subgroup (2)			Subgroup (3)
H0: Oil ⇏ Stock	K	${\overline{\text{Z}}}_{\text{N},\text{T}}$	${\stackrel{\sim }{\text{Z}}}_{N,T}$	K	${\overline{\text{Z}}}_{\text{N},\text{T}}$	${\stackrel{\sim }{\text{Z}}}_{N,T}$	K	${\overline{\text{Z}}}_{\text{N},\text{T}}$	${\stackrel{\sim }{\text{Z}}}_{N,T}$
Firm age	1	2.032*	2.013*	1	-1.027	-1.030	1	-1.173	-1.176
Firm size	1	1.642	1.625	1	-0.149	-0.157	1	-1.669	-1.669
Stock liquidity	1	1.195	1.180	1	-0.697	-0.702	1	-0.645	-0.650
Systematic risk	1	-0.991	-0.995	1	-0.282	-0.292	1	1.178	1.163
Panel C: Securities and commodity contracts intermediation
	Subgroup (1)			Subgroup (2)			Subgroup (3)
H0: Oil ⇏ Stock	K	${\overline{\text{Z}}}_{\text{N},\text{T}}$	${\stackrel{\sim }{\text{Z}}}_{N,T}$	K	${\overline{\text{Z}}}_{\text{N},\text{T}}$	${\stackrel{\sim }{\text{Z}}}_{N,T}$	K	${\overline{\text{Z}}}_{\text{N},\text{T}}$	${\stackrel{\sim }{\text{Z}}}_{N,T}$
Firm age	1	-1.197	-1.195	1	0.038	0.034	1	0.744	0.735
Firm size	1	-0.915	-0.915	1	-0.212	-0.215	1	0.679	0.671
Stock liquidity	1	-0.195	-0.199	1	-1.017	-1.016	1	0.679	0.671
Systematic risk	1	0.169	0.163	1	0.011	0.006	1	-0.756	-0.757

The Dumitrescu-Hurlin panel Granger causality test is conducted with weekly price returns between January 2007 and December 2019. Shown in the table are the standardized test statistics against the null hypothesis of no causality from oil price returns to stock returns across all the firms in each subgroup. The asterisks represent the significance level of 1% (**) and 5% (*). Firms are divided into three subgroups based on one of the following characteristics: the number of years firm i has been listed in CRSP (Firm age); a firm’s average market capitalization during the period (Firm size); a firm’s average daily transaction volume during the period (Stock liquidity); and a firm’s beta to the CRSP value-weighted stock returns (Systematic risk). Subgroups (1), (2), and (3) indicate the top one-third (young, small, low volume, low beta), the middle one-third, and the bottom one-third (mature, large, high volume, high beta) within a sector or sub-sector, respectively. The optimal lag order, K, is determined using the Bayesian information criterion (BIC).