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Oil Risk Exposure: The Case of the U.S. Oil and Gas Sector


  • We thank two anonymous referees for providing many insightful comments. We gratefully acknowledge valuable comments and suggestions from Cynthia Campbell and Robert Van Ness (the editor). We would also like to thank Mufaddal Buxamusa, Jeff Oxmann, participants at the 2009 Midwest Finance Association Annual Meetings and the 2009 Southwestern Finance Annual Meetings, and seminar participants at the University of St. Thomas and the Xavier Institute of Management for useful comments. We also thank Anna Gibowska for providing excellent research assistance. We gratefully acknowledge summer research funding from the University of St. Thomas, Opus College of Business.

Corresponding author: Department of Finance, Opus College of Business, University of St. Thomas, 1000 LaSalle Avenue, Minneapolis, MN 55403; Phone: (651) 962-4416; Fax (651) 962-4276; E-mail:


We estimate oil price risk exposures of the U.S. oil and gas sector using the Fama-French-Carhart's four-factor asset pricing model augmented with oil price and interest rate factors. Results show that the market, book-to-market, and size factors, as well as momentum characteristics of stocks and changes in oil prices are significant determinants of returns for the sector. Oil price risk exposures of U.S. oil and gas companies in the oil and gas sector are generally positive and significant. Our study also finds that oil price risk exposures vary considerably over time, and across firms and industry subsectors.