Returns Generated by Equity Index of UK - Dissertation Example

The findings of the regression analysis also support the evidence of oil prices volatility having no impact upon the returns generated by the oil and gas sector of the UK. The strong but negative relationship between oil and gas sector returns and various other factors such as benchmark equity index i.e. FTSE100, exchange rate movements and short term interest rates are found in the study consistent with some previous research findings as well. VARIABLE CHOICE Under previous studies of El-Sharif (2005) and Sardosky (2001), there are few variables taken into consideration to check the returns generated by oil and gas sector companies of the UK.

In a study by El-Sharif (2005), this impact is studied through using four variables which are returns generated from oil prices volatility, returns generated by the UK equity index, returns generated by foreign exchange rate movements, and lastly returns generated from the short-term interest rate. Under the current study, one additional variable has been added in the overall model of the study i.e. returns generated from Natural Gas Prices Volatility.

Returns generated from Gas Prices Volatility Gas prices is the second factor that has an influence upon the returns of the oil and gas sector companies returns besides oil prices volatility. Returns generated by Equity Index of UK This variable is taken into consideration to study the overall influence of the equity market of the UK upon the oil and gas sector. Returns generated by Foreign Exchange Rate Movement Since the UK is one of the largest oil producers in the European Union, therefore, it also exports oil and allied products to other nations as well.

With such exports, the oil and gas sector of the UK is highly impacted by the foreign currency movements as a result this factor is also studied under this research. Returns generated by the Short-term Interest Rate is included in the model because it provides an alternative investment horizon to the investors. It is assumed that variability in the short-term interest rates can direct the decisions of investors. 3.6 Research Methodology (Edited) This research follows the literature that uses the international APT model.

The first step taken for analyzing data is the comparison of means through descriptive statistics and a one-sample t-test. In order to check whether the means of all the variables are distinguishable from zero or not, a one-sample t-test has been conducted. From the tables provided below, it can be inferred that only three variables are found to be ones that can be significantly distinguished from zero such as returns generated from UK oil and gas sector companies, returns generated from the UK equity index and lastly, returns generated from interest rate returns.