Fracking, drilling and asset pricing: estimating the economic benefits of the shale revolution

OMI Seminar Series

We quantify the effect of a significant technological innovation, shale oil development, on asset prices. We use stock price changes on major shale news announcement days to link aggregate stock price changes to shale development activity. Using these announcement days, we exploit industry cross-sectional variation in price changes to construct a shale mimicking portfolio. We show that this portfolio can help explain aggregate stock market returns, 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 approximately $2.6 trillion of the increase in aggregate U.S. equity market capitalization since 2009 can be attributed to shale oil.


Nikolai Roussanov (Wharton, University of Pennsylvania)

Tuesday, October 13, 2015 - 12:30
to 13:30