OIL PRICES MOVEMENTS AND INDUSTRY STOCK RETURNS: EVIDENCE FROM PAKISTAN STOCK EXCHANGE (PSX)

Muhammad Asif; Sharif Ullah Jan; Shahid Iqbal

Muhammad Asif Assistant Professor, City University of Sciecnce and Information Technology, Peshawar, Pakistan
Sharif Ullah Jan Lecturer Management Sciences, FATA University, TSD Dara, NMD Kohat, Pakistan
Shahid Iqbal Senior Lecturer, Riphah International University Islamabad, Pakistan

Keywords: Stock Returns, Returns Volatility, Oil Prices Fluctuation, Pakistan Stock Exchange

Abstract

The recent financial and economic recessions have chiefly increased the importance of risk management and forecasting for business firms. Capital markets being the main pillar of economy are affected the most in such circumstances. The current study has attempted to investigate the impact of oil prices on the returns and volatility of Pakistani listed firms using the GARCH (1,1) model. Furthermore, this relationship has been investigated by categorizing the existing sectors of the Pakistan Stock Exchange (PSX) into oil producers, oil users, and oil substitutes for the period from January 2015 to December 2019. The findings of the study highlighted some strong evidence regarding the oil price movement and the firms’ returns across these sectors. Interestingly, firms’ returns behave differently about the magnitude of significance and direction of symbols based on their nature of the industry. Therefore, it is suggested for future studies to consider the nature of the sector of oil while exploring the relationship between oil prices and stock returns.

Author Biography

Muhammad Asif, Assistant Professor, City University of Sciecnce and Information Technology, Peshawar, Pakistan

Dr Muhammad Asif is working as Assistant Professor(Managment Sciences) City Unviersity Peshawar. He is also working as managing editor of all City University research Journals.He is also chief editor of City University journal of Social sciecnes.