Modelling the Empirical Impact of Oil Prices Volatility on Stock Exchanges: A Case of a Developing Nation

Abstract

Petroleum products are considered one of the most important factors affecting any economy around the globe. That is why any change in its prices affects all other economic variables. Furthermore, the health of any given stock of the organization reflects the investor’s trust and belief in the good performance of the organization. The study is an effort to gauge the impact of change in oil prices. The aim of the study is to measure the magnitude of the relationship between the volatility of local oil selling prices fixed by the government versus the change in stock prices of the oil marketing companies. The given study based on the secondary data aims to examine the impact of change in Petrol a.k.a. Premier Motor Gasoline (PMG) and Diesel a.k.a. High-Speed Diesel (HSD) prices from Jan 2019 to Feb 2022. Since, the nature of the study is quantitative, therefore deductive approach has been used. The data has been extracted from OGRA price notification for the oil prices within the country and Share prices (PSO, HASCOL, SHELL & ATTOCK) has been extracted from Pakistan Stock exchange’s website for the given period whereas the regression method has been used on E View, a statistical software. From the results, it is found that price change in Petrol (PMG) and Diesel (HSD) has significant impact on share prices of PSO and HASCOL scrips on given trading day. Further, price change of PMG positively affects PSO shares however, it negatively effects HASCOL scrips. Similarly, any price change in HSD negatively affects PSO share prices on given trading day. It is also evident that there is no significant impact on oil price change on the scrips of SHELL and APL.