Marius Sikveland

The Behaviour of Salmon Price Volatility

Salmon prices exhibit substantial volatility. An understanding of the structure of volatility is of great interest since this is a major contributor to economic risk in the salmon industry. The volatility process in salmon prices was analysed based on weekly price data from 1995 to 2007. The Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model was used to test for volatility clustering and persistence of volatility for prices. We find evidence for and discuss the degree of persistence and reversion in salmon price volatility. Further, we find increased volatility in periods of high prices. For the industry this means that larger expected profits more often than not come at a tradeoff of greater price risk.

The Behavior of Operating Earnings in the Norwegian Salmon Farming Industry

It is well known that salmon aquaculture is a cyclical industry with substantial price volatility. However, limited attention has been given to the economic performance of the firms in the industry or their valuation. In this article we look closer at earnings before interest and tax (EBIT) in the Norwegian salmon farming industry. This is among the most common accounting measures of firm performance, and it is also used extensively in firm valuations. We find that the components of earnings have different time series behavior. Our empirical analysis shows that earnings from the Norwegian salmon farming industry can be characterized as a random walk. However, earnings/kg of fish sold is a more predictable variable and is mean reverting with clear cycles.

Profitability in Norwegian salmon farming: The impact of firm size and price variability

ABSTRACT In this paper, we investigate the impact of firm size and price variability on firm profitability in the Norwegian salmon farming industry using a panel data set of all companies from the period 2000 to 2014. Several proxies for firm size are included in the analysis. We find that firm’s share of total sales has a positive impact on profitability, while an alternative proxy, total assets, is negatively linked to profitability. Financial leverage (gearing) has a negative impact, but liquidity (current assets/current liabilities) is not found to significantly affect profitability. Operating efficiency indicators like working capital management (net working capital/total assets) and operating leverage (fixed assets/total assets) are positively associated with profitability. Finally, we find that salmon price variability increases profitability, and that smaller companies are more able to take advantage of the profit opportunities that price variability offer, compared to larger companies.

Exploration risk in international oil and gas shareholder returns

This paper focuses upon the oil and gas industry, examining the association between exploration activity risk and company shareholder returns. Using monthly returns data from 189 oil and gas companies between 1993 and 2013, we supplement the Fama – French approach with an industry-specific fundamental factor in order to capture company exposure to oil and gas exploration risk. Our results indicate that exploration risk contributes significantly to oil company excess returns throughout the period of our study. Moreover, we are unable to uncover asymmetric effects related to positive/negative oil price changes. The effects of the interaction between the variables of exploration and oil price are equally difficult to uncover.

Vertical Integration and Valuation of International Oil Companies

This paper studies financial statement information from the 50 largest international oil and gas companies during 1992 to 2011 and evaluates their relation to market values. In particular, we examine how this relationship is affected by accounting method choice (successful efforts versus full cost accounting) and vertical integration. We find that net income is more value relevant for full cost companies compared to companies that use the successful efforts accounting method. Furthermore, the value relevance of oil and gas reserves is different among successful efforts and full cost companies. Larger reserves among successful efforts companies are awarded a premium by stock markets. The value relevance of book value is significantly lower for integrated companies than for pure upstream companies. We also find that the value relevance of oil and gas reserves is different for upstream and integrated companies.