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Impact of oil prices on firm stock return: industry-wise analysis

Author

Listed:
  • Rida Waheed

    (Shandong University)

  • Chen Wei

    (Shandong University)

  • Suleman Sarwar

    (Shandong University)

  • Yulan Lv

    (Shandong University)

Abstract

The study investigates the impact of oil prices on firm-level stock returns in case of Pakistan over the period 1998–2014, as this relationship is neglected by the previous literature. By using the panel data estimation, the results of full sample indicate significant positive effect of oil price changes on firm stock returns in the same period, whereas the lagged oil price changes have significant negative effect on firms’ stock return. Moreover, the industry-level analysis also confirms the similar findings; results indicate significant positive impact of oil price on firms’ stock return in full sample, textile, chemical and miscellaneous industry, while the lagged oil price changes negatively affect the stock returns of full sample and all the industries except tobacco, jute and vanaspati industries. The study confirms that rise in oil price transfers a positive signal in the stock market that boosts the firm-level stock returns in Pakistan. In contrast to the negative shocks, the stock returns are significantly affected by the positive oil price shocks.

Suggested Citation

  • Rida Waheed & Chen Wei & Suleman Sarwar & Yulan Lv, 2018. "Impact of oil prices on firm stock return: industry-wise analysis," Empirical Economics, Springer, vol. 55(2), pages 765-780, September.
    • Handle: RePEc:spr:empeco:v:55:y:2018:i:2:d:10.1007_s00181-017-1296-4
    DOI: 10.1007/s00181-017-1296-4
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    More about this item

    Keywords

    Oil price; Firm-level return; Pakistan;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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