A study on the impact of crude oil prices on share prices

How important are oil price fluctuations and oil price volatility on equity market performance? What are the equity return implications if volatility turns out to be significant? Which industrial sector is most vulnerable to oil price volatility? We assess this issue in an economics-finance nexus for BSE companies using a simple linear regression model including real stock returns, Global Brent crude oil prices and oil price volatility. Results indicate the dominance of oil price volatility on real stock returns. Oil price volatility can have profound effect on the time horizon of investment and firms needs to adjust their risk management procedures accordingly. The companies have been chosen from those sectors which have a close relationship with crude oil or crude oil products like Oil & Gas drilling companies, Refineries & Oil marketing companies, Automobile companies, Petrochemicals, Paint & Plastics manufacturing companies.