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The Effect of Changes in the Percentage Depletion Allowance on Oil Firm Stock Prices

Andrew B. Lyon

Year: 1989
Volume: Volume 10
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No4-7
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In this paper I examine the effect of changes in tax laws on the value of firm stock prices. The behavior of oil firm stock prices in 1969 (at the time of congressional votes to reduce the percentage depletion allowance) is studied to test the hypothesis that this legislation resulted in a decline in the value of oil firms. The empirical results show that statistically significant declines in the average value of oil frm stock prices did occur at the time of House and Senate committee votes. Cross-sectional tests show a significant correlation between the measured declines for individual firms and the expected declines predicted for those firms in the period surrounding one of the two committee votes.

Oil Risk in Oil Stocks

Bert Scholtens  and Lei Wang

Year: 2008
Volume: Volume 29
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No1-5
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We assess the oil price sensitivities and oil risk premiums of NYSE listed oil & gas firms returns by using a two-step regression analysis under two different arbitrage pricing models. Thus, we apply the Fama and French (1992) factor returns in a study of oil stocks. In all, we find that the return of oil stocks is positively associated with the return of the market, the increase of the spot crude oil price, and negatively with the firm�s book-to-market ratio. The oil firms sensitivities to the market, the oil price and the book-to-market ratio are positively priced by the market under the integrated model. However, both the size and significance of the oil risk premium are unstable. This suggests that increases in the oil price impact on expectations about the oil stocks� future return. The positive oil risk premium may disappear as investors change their perception of the effect of oil price changes on stock returns.

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