Oil Prices Movements and Industry Stock Returns: Evidence From Pakistan Stock Exchange (Psx)

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.

The Dynamics of Financial Development, Government Quality, and Economic Growth in Different Groups of Economies

“…The response of financial development to the regressors of model 11 is shown in Figure 3. The immediate reaction from financial development to FD innovation is higher and transitory for all three groups of economies, indicating that FD shock consists primarily of (unsystematic) measurement errors [42]. In contrast, a positive shock of GDPC increases the FD through the accelerator effect, which ultimately expands the banking sector and financial market activities.…”