ABSTRACT We analyse anomaly and factor risk premia in the global oil and gas (OG) sector, which plays a central role in the global economy through its importance for energy supply, industrial production, and capital markets. Using firm‐level and portfolio data, we examine whether cross‐sectional return patterns reflect systematic risk compensation or characteristic‐driven mispricing. Our OG‐specific portfolios and factors isolate sectoral return dynamics from oil price fluctuations. We document several persistent anomalies. However, only a subset translates into priced factor exposures, indicating that systematic risk dominates valuation in the sector. Time‐series results show that OG‐specific factors explain return variation beyond conventional global benchmarks, while cross‐sectional evidence reveals that priced factor exposures are primarily driven by market, size, value, and profitability and investment factors. The pricing impact of the latter two factors is sensitive to construction method and definition of firm profitability and investment. Nevertheless, most characteristic effects disappear once portfolios are diversified. Overall, pricing in the global OG sector appears more closely aligned with efficient, risk‐based mechanisms than with sentiment‐driven valuation.
Virk et al. (Sun,) studied this question.