Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

Through panel data regression and impulse-response analysis, this study examines the effects of supply and demand shocks of oil price derived by structural vector autoregressive method suggested by Kilian(2009) on stock returns of energy firms. Current study contributes to academic field in that it explains the effects of supply and demand shocks on stock return in terms of input-cost and demand effects in Finance theory. Main test results are as follows. First, positive supply shock leads to increasing stock return with improvement of cash flow in terms of input-cost effect. Second, positive demand shock results in falling stock return attributed to increasing inflationary pressure and risk aversion of investors in terms of demand effect. Third, not only asset size but also dividend payout ratio and market portfolio return affect the stock returns of energy firms with negative and positive direction, respectively in line with those of Fama and French(2001, 1993).