Risk contribution of crude oil to industry stock returns

Oil shock is an important source of risk and hence has a significant effect on the real economy and financial markets. The objective of this study is to explore the crude oil risk contribution to industry-level returns in the US stock market using the ADCC-ACoVaR model. We employ the Kolmogorov-Smirnov test to rank the contribution and then investigate the structural breakpoints using the Bai and Perron (2003) test. Our empirical results reveal that oil contributes the highest risk to the energy industry and the lowest risk to the Consumer Staples industry. We also find notable discrepancies between industries with regard to number of breakpoints and the break date. In particular, the rankings of the financial, materials, and utilities industries fluctuate dramatically across different sub-samples. In addition, the crude oil risk contribution was commonly larger across all these industries during the 2008 crisis period. Our findings are helpful to investors, market participants, and policy makers.