Fracking, Drilling, and Asset Pricing: Estimating the Economic Benefits of the Shale Revolution∗
نویسندگان
چکیده
We quantify the effect of a significant technological innovation, shale oil development, on asset prices. Using stock price changes on major news announcement days allows us to link aggregate stock price changes to shale development activity as well as other oil supply shocks. We exploit cross-sectional variation in industry portfolio returns on announcement days to construct a shale mimicking portfolio. This portfolio can help explain aggregate stock market fluctuations, but only during the time period of shale oil development. Based on the estimated effect of this mimicking portfolio on aggregate stock market returns, we find that $2.5 trillion of the increase in aggregate U.S. equity market capitalization since 2012 can be attributed to shale oil. Industries benefitting the most from the shale oil revolution, as indicated by their shale announcement day returns, added more jobs over the shale period than those unrelated to shale.
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