Oil price and stock returns of consumers and producers of crude oil

In this paper we investigate how differently stock returns of oil producers and oil consumers are affected from oil price changes. We find that stock returns of oil producers are affected positively by oil price changes regardless of whether oil price is increasing or decreasing. For oil consumers, oil price changes do not affect all consumer sub-sectors and where it does, this effect is heterogeneous. We find that oil price returns have an asymmetric effect on stock returns for most sub-sectors. We devise simple trading strategies and find that while both consumers and producers of oil can make statistically significant profits, investors in oil producer sectors make relatively more profits than investors in oil consumer sectors.