Group Members• MARYAM KHAN13029046-002MBF

AFFECT OF OIL PRICES ON STOCK RETURN

Abstract• This study will examine the relationship

between oil prices and stock return rate in Pakistan.

• In order to find the relationship we will use secondary data.

• To get the results regression analysis will be used.

INTRODUCTION

STOCK RETURN

OIL PRICES

IMPACTRising oil prices on stock prices depends of course

on whether company is a consumer or producer of oil Increases in oil demand without offsetting increases in supply lead to higher oil prices.

Higher oil prices act like an inflation tax on consumers and producers by reducing the amount of disposable income consumers have left to spend on other goods and services.

OBJECTIVE

The study investigates the interrelation and dependency of stock returns on oil prices in Pakistan. This paper is an effort to evaluate the relationship of oil price movements and stock returns in a booming market of Pakistan.

PROBLEM STATEMENT

The subject identified is stock price and the other variaable is weather conditions. We have chosen the two sector.

LITERATURE REVIEW

He concluded that market is sensitive to oil price changes. There is a positive impact on stock market return. The intensity of market’s reaction also depends on the level of oil prices

(Gogineni, Sridhaar;, 2008)

SECTORS

OIL AND GAS SECTOR

ATTOCK PETROLEUM

PAKISTAN STATE OIL

CONSTRUCTION AND MATERIAL

SECTOR

LUCKY CEMENT

ATTOCK CEMENT

VARIABLES

DEPENDENT

STOCK RETURN

INDEPENDENT

OIL PRICES

HYPOTHESIS

‘‘Oil prices have a positive relation with the stock return’’

POPULATION:The population size for the study has been the companies listed on ww.kse.com.pk under the industry sectors of oil and gas, and construction and materials sector.

SAMPLE SIZE:Attock Petroleum and Pakistan State Oil have been studied under Oil and Gas Sector.Lucky cement and Attock cement have taken under construction and materials sector.

DATA TYPE & ANALYSISData collected from 2013-2015 of first six

months by using the 2nd, 15th or 30th of each month.

(KSE and Investing Commodity Prices) Descriptive StatisticsHistogramRegressionCorrelation

ATTOCK PETROLEUM

RESULTS

SR (APL) = 0.42364+ (-0.0037) EC + e• If all other things remain constant i.e. there is

no influence of other variables on stock return rate then stock return will have a value of 0.42364 percent

• About slope: a 1 unit change in oil prices will affect stock return by - 0.0037 percent.

Cont.…• PSO PETROLEUMSR (PSO) = 0.128+ (-0.001) EC + e

• LUCKY CEMENTSR (LUCK) = 0.2575+ (-0.002) EC + e

• ATTOCK CEMENTSR (ACL) = 0.679+ (-0.006) EC + e

CONCLUSION

• By applying the tools, we have concluded that oil prices has a positive relation with the stock return.

• A firm should be able to switch production processes to compensate for added fuel costs.

• Increase in oil prices will raise cost for business to spend more money on it.

RECOMMENDATION

• Supply and demand forces are the determinants of oil prices, a firm should monitor.

• Use of hedging techniques properly.

Thank You