Oil sensitivity and systematic risk in oil-sensitive stock indices

This paper has two primary objectives. First, is to examine and compare the oil sensitivity of equity returns of non-Gulf, oil-based countries (Mexico and Norway) with that of two major oil-sensitive industries (US oil and transportation industries). Second, is to examine and compare the oil sensitivity of those returns with their sensitivity to systematic risk with respect to the world capital market. The findings suggest that the oil price growth leads the stock returns of the oil-exporting countries and the US oil-sensitive industries, with the US oil industry showing the greatest sensitivity. The results also indicate that investors view the systematic risk more importantly than the oil sensitivity in pricing those oil-sensitive returns, regardless of the direction of the world capital market. (C) 2004 Elsevier Inc. All rights reserved.