Oil price shocks and the hedging benefit of airline investments

In the light of finite oil reserves, Persian Gulf oil-exporting economies have recently undertaken major investments in their domestic travel and tourism industries. Building on Bayesian SVAR model global market Baumeister Hamilton (2019), we investigate conditional comovement airline stock returns with real prices response to structural supply demand shocks. We find that investing Datastream World Airline Index offers a hedging benefit supply, consumption demand, inventory shocks, whereas there is no evidence systematic positive or negative following shocks world economic activity returns.