Recent studies of the oil market demonstrate endogeneity of the oil price by modelling It as a function of consumption and precautionary demands and producers' supply. However, studies analysing the effect of oil price uncertainty on investment do not disentangle uncertainties raised by underlying components which play a role in the oil market. Accordingly, this study uses a new approach to investigate the relationship between investment and uncertainty for a panel of U.S. firms operating in the oil and gas industry. We decompose oil price volatility to be driven by structural shocks that are recognized in the oil market literature, over and above other determinants, in order to study whether the investment uncertainty relationship depends on the drivers of uncertainty. Our findings suggest that oil market uncertainty lowers investment only when it is caused by global (consumption) oil demand shock. Stock market uncertainty is found to have a negative effect on investment with a year of delay. The results suggest no positive relationship between irreversible investment and uncertainty, but interestingly, a positive relation exists for reversible investment. This finding is in line with the option theory of investment and implies that the irreversibility effect of increased uncertainty dominates the traditional convexity effect

Ahmadi, M., Manera, M., & Sadeghzadeh, M. (2019). The investment-uncertainty relationship in the oil and gas industry. RESOURCES POLICY, 63, 1-10 [10.1016/j.resourpol.2019.101439].

The investment-uncertainty relationship in the oil and gas industry

Ahmadi, M
Membro del Collaboration Group
;
Manera, M
Membro del Collaboration Group
;
2019

Abstract

Recent studies of the oil market demonstrate endogeneity of the oil price by modelling It as a function of consumption and precautionary demands and producers' supply. However, studies analysing the effect of oil price uncertainty on investment do not disentangle uncertainties raised by underlying components which play a role in the oil market. Accordingly, this study uses a new approach to investigate the relationship between investment and uncertainty for a panel of U.S. firms operating in the oil and gas industry. We decompose oil price volatility to be driven by structural shocks that are recognized in the oil market literature, over and above other determinants, in order to study whether the investment uncertainty relationship depends on the drivers of uncertainty. Our findings suggest that oil market uncertainty lowers investment only when it is caused by global (consumption) oil demand shock. Stock market uncertainty is found to have a negative effect on investment with a year of delay. The results suggest no positive relationship between irreversible investment and uncertainty, but interestingly, a positive relation exists for reversible investment. This finding is in line with the option theory of investment and implies that the irreversibility effect of increased uncertainty dominates the traditional convexity effect
Articolo in rivista - Articolo scientifico
Scientifica
Investment; Oil market; SVAR-GARCH; Uncertainty
English
Ahmadi, M., Manera, M., & Sadeghzadeh, M. (2019). The investment-uncertainty relationship in the oil and gas industry. RESOURCES POLICY, 63, 1-10 [10.1016/j.resourpol.2019.101439].
Ahmadi, M; Manera, M; Sadeghzadeh, M
File in questo prodotto:
File Dimensione Formato  
Resources Policy - 2019.pdf

Solo gestori archivio

Descrizione: Articolo principale
Tipologia di allegato: Publisher’s Version (Version of Record, VoR)
Dimensione 1.66 MB
Formato Adobe PDF
1.66 MB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/252341
Citazioni
  • Scopus 8
  • ???jsp.display-item.citation.isi??? 7
Social impact