Portfolio Theory and Stocks in the Modern Energy Sector
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Authors
Becker, Chipper
Jones, Wheaten
Winslow, Caroline
Issue Date
2025-04-25
Type
Other
Language
en_US
Keywords
Scholarship Sewanee 2025 , University of the South, Finance, Energy Based Portfolio
Alternative Title
Abstract
This paper presents a strategic approach to constructing a five-stock portfolio in the energy sector, encompassing ExxonMobil (XOM), Marathon Petroleum (MPC), Cameco (CCJ), Centrus Energy (LEU), and Quanta Services (PWR). By integrating Modern Portfolio Theory (MPT) and the Capital Asset Pricing Model (CAPM), this study aims to maximize returns while maintaining mid-level risk. A macroeconomic analysis underscores the resilience of energy investments in periods of fluctuating interest rates, evolving geopolitical dynamics, and shifting commodity prices. Although CAPM-based regressions reveal low R-squared values for several of these stocks, indicating that market factors alone do not fully explain their performance, the Portfolio Theory framework captures additional sector-specific variables like oil price volatility, nuclear policy incentives, and infrastructure demand. The resulting minimum variance frontier highlights how diversification reduces overall portfolio volatility, particularly when combining oil, nuclear, and infrastructure. In conclusion, this study demonstrates that a data-driven, sector-focused methodology guided by MPT can more effectively balance risk and return than relying on CAPM alone.
Description
Citation
Publisher
University of the South