Impact of Jet Fuel Price on the Returns of Airlines Stock Price in ASEAN-5

Teh, Yee Ching (2021) Impact of Jet Fuel Price on the Returns of Airlines Stock Price in ASEAN-5. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

This study attempts to investigate the impact of the jet fuel price on the returns on the airline stock price with the evidence of airline companies in ASEAN-5 which includes Malaysia, Singapore, Thailand, the Philippines, and Indonesia. This paper also examines the short run and long run nexus between both variables by using the daily data over the period of 3rd of November 2014 to 31st of July 2020. Towards these purposes, this paper has employed the unit root test, diagnostic and stability tests, lag length selection, autoregressive distributed lag approach (ARDL), and error correction model (ECM) techniques. The robustness test is also done in this paper to ensure the stability of the result by using the weekly data over the period of 3rd of November 2014 to 31st of July 2020. The long run estimation results suggest that only the jet fuel price is only affected the share price of Singapore Airlines with a positive and statistically significant impact, while the jet fuel price does not impact the share price of the remaining eight (8) airline companies. Besides, AirAsia, AirAsia X, Singapore Airlines, Bangkok Airways, Nok Air, Cebu Pacific, and Garuda Indonesia are all cointegrated with the jet fuel price in the short run with a positive relationship. However, Thai Airways and Philippine Airlines are not cointegrated with the jet fuel price in both the short run and long run.