The Impact of 2007-2008 Financial Crisis on Stock Return in China and the US - Dissertation Example

The paper "The Impact of 2007-2008 Financial Crisis on Stock Return in China and the US" is a delightful example of a dissertation on finance and accounting. The stock exchange is one of the key drivers of the capital market, as an investment in stocks helps to raise the financial capital of a firm and the industry at large. It has been always speculated that stock returns are influenced by fluctuations in oil prices and the firm value of the respected companies. This is because oil is an important infrastructure for driving the operations of any industry. The focus has been shifted to the likely variables that influence the documented predictors of stock market indices.  Variables like Return on Assets, Price-Earnings Ratio, and Tobin’s Q are considered as documented and effective predictors of stock market indices. Hence, they might be assumed to influence the stock returns indirectly. However, these variables are subjected to different shocks in the stock market and are assumed to be governed and influenced by different independent variables, including oil price.  The results of the dissertation indicated that oil price did not significantly influence Tobin’s ratio, PER and ROA similarly across all industries. For some industries (Transport and Chemicals) it was non-significant but was an influencer as a product of other variables. The Tobin’s Ratio and ROA regression models were effective across all industries with the goodness of fit >80%. However, the PER model had the goodness of fit < 80% across all industries (except the transport industry) and hence should not be considered a very good model of predicting stock returns during fluctuating oil prices or fluctuating exchange rates. However, oil prices did significantly influence the PER of oil companies and oil service companies. The present study indicated that increase in PER related to a decrease in DPS for oil companies. The present study clearly indicated that the ROA model and Tobin’s Q ratio model may be considered effective models for predicting stock returns during fluctuating oil prices or fluctuating exchange rates.

Whether Oil Price is an Effective Predictor of Firm Value and Stock Returns? A Perspective of the United States Industrial Sector

 Chapter 1: Introduction

1.1 Background of the Study

                    It is well known that for achieving long-term sustained economic growth, financial resources should be allocated and optimized appropriately. Hence, financial markets and stock markets are significant influencers of the economic growth of a country. The stock exchange is one of the key drivers of the capital market, as an investment in stocks helps to raise the financial capital of a firm and the industry at large. It has been always speculated that stock returns are influenced by fluctuations in oil prices and the firm value of the respected companies.