Abstract
Focusing on the hedging-stock pricing research landscape, this research investigates the role of different futures hedging instruments, namely oil futures, gold futures, and VIX futures and the effect of net hedging benefits by employing them on oil price risk exposure to Asia- Pacific airline firms’ stock returns using the hedging-stock pricing model. This research examines 22 Asia-Pacific airline firms’ stock returns behaviour with monthly frequency data from 2010 to 2019. A complementary analysis approach using the fixed effect panel and quantile regressions are used to analyse the research model. The findings confirm the negative effects of oil price risk and the benefits of hedging oil price risk on airline stock returns, and the superiority of gold futures over oil futures and VIX futures as effective hedging instruments. The findings provide hedging insights to investors to manage equity investment against oil price risk. In the academic context, little is known about the benefits of cross-commodity hedging to reduce risk in equity investment and this work advances the hedging- stock pricing research. This research confirmed pairing of gold futures-airline stock produces an effective hedge. The equity investors could use cross-hedging strategy to enhance airline stock investment portfolio returns.
Keywords: Airlines firms, Cross-hedging, Equity investment, Market model, Oil price risk, Investor perspective.
How to Cite:
Felix, S. B., Tuyon, J., Matahir, H. & Ghazali, M. F., (2023) “Hedging the Oil Price Risk Factor on Airline Stock Returns in the Asia-Pacific: A Test of Effective Hedging Instruments”, Australasian Accounting, Business and Finance Journal 17(2), 122-146. doi: https://doi.org/10.14453/aabfj.v17i2.09
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