Title: US airline stock market performance and change in investor behaviour over the great recession of 2008

Authors: Rebecca L. Wood; Jayendra S. Gokhale

Addresses: Department of Economics, Finance and Information Systems, 249 College of Business, Embry-Riddle Aeronautical University, Daytona Beach, FL-32114, USA ' Department of Economics, Finance and Information Systems, 249 College of Business, Embry-Riddle Aeronautical University, Daytona Beach, FL-32114, USA

Abstract: We study the relationship of West Texas Intermediate (WTI) crude oil returns and the stock market returns with the US airline stocks before, during and after the 2008 financial crisis. We confirm the positive relationship of the airline stock returns with the overall market and the negative relationship with WTI. However, we find that the crisis led to a structural change in this relationship. Our results differ for low-cost airlines which absorb the oil price shock better as compared to legacy airlines. We also find that there is a difference in the relationship between the airline stock returns and WTI returns when asymmetric WTI returns are considered. Investors punish airline stocks more when there are asymmetric negative WTI returns as compared to asymmetric positive returns. While our results are in line with the existing literature on the overall stock markets, this study is unique because it provides a context for the behaviour of airline stocks.

Keywords: US airlines; airline stock returns; crude oil prices; financial crisis.

DOI: 10.1504/IJEA.2017.092274

International Journal of Economics and Accounting, 2017 Vol.8 No.3/4, pp.215 - 239

Received: 30 Jan 2017
Accepted: 23 Jan 2018

Published online: 29 May 2018 *

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