Date of Graduation

5-2016

Document Type

Thesis

Degree Name

Bachelor of Science in Business Administration

Degree Level

Undergraduate

Department

Finance

Advisor

Rennie, Craig

Reader

Santamaria, Sergio

Abstract

This paper investigates the relation between crude oil price volatility and stock returns among oil companies using a three-part methodology, by using the West Texas Intermediate (WTI) as oil price benchmark. I asses the various indicators that set signals for oil price volatility and the interpretation of each (PMI, S&P500, DJIA, and World Crude Oil Output). This research also focuses on the relation between different types of companies in the oil industry (integrated, upstream, and downstream) and how each type of company will be assessed in a particular way to predict abnormal returns, based on market data and statistical analyses results and interpretation.

Comments

This paper makes three contributions to the literature on the determinants of oil company performance. First, it gives a trend analysis methodology that serves as a first indicator of both oil prices, and oil company’s stock return levels. Second, it provides a guide on understanding the oil industry and its different reactions to crude oil volatility. Finally, this paper demonstrates the timely movements and the significance of these fluctuations on oil stock returns. With this paper I expect to give the reader a clear explanation of the relation between oil price volatility and the financial and stock return performance of different types of oil companies during different time periods. I also anticipate highlighting findings that suggest signals to look for when interpreting data or searching for relevant variables for predicting investment performance.