Exposure and Derivative Usage,During Different Volatility of Commodity Price. The Case of the U.S. Oil Industry

• Main Authors: Kai-Chi Lin, 林凱祺
• Other Authors: Shuang-Shii, Chuang
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/89895709182324929664

碩士 === 國立成功大學 === 國際企業研究所碩博士班 === 97 === This study attempts to answer the question of whether oil producers should hedge by forward selling or not during the period of constant growth and low volatility in gold prices. This study discusses and examines the relationship between the two constructs in the U.S. oil producing industry － forward selling usage and the stock price exposure to change in the price of oil. The negative relationship between derivative use and the stock price exposure to change in the oil price is very obvious. Even more, we wonder whether the trend and volatility of oil price influence the relationship between the two constructs. The study selects two different time periods to examine the effect that derivative usage influences the exposure to change in the oil price. One window is from 2000 to 2002, and the other one is from 2005 to 2007. In our sample, we pick up 53 U.S. oil producers which are both in the two time windows. On our anticipation, we not only expect that there is general negative relationship in the time windows 2000-2002 which is normal volatile trend of oil price, but also think that there is diminishing negative relationship in the time windows 2005-2007 which is increasing trend of oil price. And this part is never mentioned before in any other literatures. We want to clarify this new concept in the oil producing industry. And allow the managers to gain insights into the effect of volatility on a company’s return given its particular cost structure which in turn, supports more informed decision making. The directions of the study’s two main structures are correspondent to our expectations and it means that the study explains the situation that when the oil price constantly goes up, investors will not think hedging firms as a suitable target to invest.