This paper aims to examine the asymmetric impact of the oil price increase and decrease on stock returns at the firm level.
To ascertain the impact oil price can exert on the stock price at the firm level, this study uses panel structural vector auto regression with various linear and nonlinear measures of oil price shock on a data set, containing 1,168 firms listed in Indian stock markets. This study also considers stock index returns, Fama-French factors and inflation as control variables.
This paper finds evidence that at firm level, net oil price increase and decrease have an asymmetric impact on stock returns. Other oil price shock measures, namely, shock because of oil price increase and decrease, do not show any sign of asymmetric impact on stock returns.
The comparison of firm-level return on its response towards oil price fluctuation can give valuable insights into a firm’s features.
