Hedging Effectiveness in Energy Market during Economic Crisis: Better Way to Integration

Hedging Effectiveness in Energy Market during Economic Crisis: Better Way to Integration

This paper investigates hedging and risk management options in the energy sector. Energy firms tend to adopt risk management tools in order to cover their financial exposure. Taking into consideration that current crisis has a significant effect on their value; we check whether energy firms actually have better output when they use hedging tools. In order to measure the effectiveness of this strategy in the energy industry, we adopt Tobin`s Q methodology. The sample of this study consists energy firms on a worldwide basis. The empirical evidence of this research confirms that energy firms may avoid huge economic problems when they adopt risk management methods. It is better enery market integration.