Does Oil Price Transmits to Emerging Stock Market Returns: A Case of Pak, India & China

Price of oil has an impact on the profit and loss of the company as oil is direct or indirect cost of operation. Therefore, the rise in crude oil prices will be expected to cause the decrease in revenue, which resulted in a reduction of immediate stock prices. The objective of the research is to get accurate answers of research questions mentioned in specific contexts of Pakistan, India and China. This paper used regression, Durbin Watson test and correlation analysis to find out the answers of research questions and objectives. The period of study is 15 years (From 2001 to 2015) of both dependent and independent variables (EPS and oil prices). Analyzing the results, it could be seen that the model is perfectly fitted to the regression analysis. In all cases of these three countries’ selected companies there is positive relationship between oil prices and earnings per share (in case of China and India there is strong correlation and moderate in case of Pakistan). We can say increasing the oil prices in the market will increase the stock return and decreasing the oil prices would decrease the stock return. In all three cases there is positive correlation among the variables defined as oil prices and EPS.