Testing the significance of pricing factors of oil and gas companies

For decades, fossil fuels have accounted for 70% to 80% of global primary energy demand. Far from ending this trend, O&G companies continue to be the main fore-runners in providing secure, versatile and widespread energy to the entire world. The relevance of this sector in the economic-financial landscape and the concern for its stability, makes that the high interest of the scientific community to explore the factors that explain the O&G cross-sectional expected returns remains intact. Through a new approach from the Random Matrix Theory, the aim is to know how many are the factors that explain the market performance of the O&G subsectors (upstream, midstream & downstream), and also if the Brent price can be considered an explanatory factor. We will show that for certain periods, Brent becomes the only factor explaining the movements in the upstream and midstream subsectors, while for most of the time the only factor is the market. Other interesting finding is that no significant factors are found for the downstream subsector, except in certain periods. With a purely statistical approach, we show the factors that explain the cross-sectional expected return of the O&G companies, providing information of special relevance for the decision making of investors, executives and politicians.

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Publication Details

Journal
PLoS ONE
Published
2024-12-30
DOI
https://doi.org/10.1371/journal.pone.0316147
Primary Topic
Market Dynamics and Volatility
Type
article
Field-Weighted Citation Impact
0.00

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article

Testing the significance of pricing factors of oil and gas companies

Antonio García‐Amate, Juan Evangelista Trinidad Segovia, M.A. Sánchez-Granero, Andrés García-Medina et al.
PLoS ONE
Market Dynamics and Volatility
article

Testing the significance of pricing factors of oil and gas companies

Antonio García‐Amate, Juan Evangelista Trinidad Segovia, M.A. Sánchez-Granero, Andrés García-Medina, Laura Molero González
article en

Abstract

For decades, fossil fuels have accounted for 70% to 80% of global primary energy demand. Far from ending this trend, O&G companies continue to be the main fore-runners in providing secure, versatile and widespread energy to the entire world. The relevance of this sector in the economic-financial landscape and the concern for its stability, makes that the high interest of the scientific community to explore the factors that explain the O&G cross-sectional expected returns remains intact. Through a new approach from the Random Matrix Theory, the aim is to know how many are the factors that explain the market performance of the O&G subsectors (upstream, midstream & downstream), and also if the Brent price can be considered an explanatory factor. We will show that for certain periods, Brent becomes the only factor explaining the movements in the upstream and midstream subsectors, while for most of the time the only factor is the market. Other interesting finding is that no significant factors are found for the downstream subsector, except in certain periods. With a purely statistical approach, we show the factors that explain the cross-sectional expected return of the O&G companies, providing information of special relevance for the decision making of investors, executives and politicians.

PLoS ONEVol. 19(12)
Mathematics Research Center (MX), Secretaría de Ciencia, Humanidades, Tecnología e Innovación (MX), University of Almería (ES)
Consejo Nacional de Ciencia y Tecnología, Ministerio de Ciencia e Innovación
Affordable and clean energy
Openalex Percentile: Top 70%
Market Dynamics and Volatility
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