Abstract:
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.

Abstract:
The Shale Revolution and the two oil crises have overwhelmingly reshaped the petroleum industry in the last decade. Heterogeneity across companies is also a big concern as many multi-product (oil and gas) and multi-segment (upstream and downstream) firms exist, both state-owned and privately-owned. Therefore, a varying coefficient model is introduced to capture the effects of time, ownership, and business portfolio on both productivity and input elasticities to closely observe the fundamental transition, which is further interpreted using decomposition equations. The shape of the production function is indeed firm- and time-variant, which confirms the transition of the industry and the necessity of using the varying coefficient model. The average productivity achieved tremendous growth after the 2007-2009 financial crisis but lost momentum following the 2014 price crash. Finally, privately-owned, gas production and downstream activities are more productive than state-owned, oil production and upstream activities, respectively. Some policy implications are also discussed.