World oil prices and equity returns of major oil and auto companies

Abstract

This paper analyzes equity performance of major U.S. oil and automobile companies during the 1970's. Both compound yields and risk-adjusted yields on common stock are used as measures of equity performance. The attribution of the yields to fundamental economic factors (including world oil prices) is investigated via cross-spectral and regression analysis. Not surprisingly, perhaps, oil company stocks outperformed auto company stocks. More importantly, world oil spot prices were significantly related to oil and auto yields, independent from general proxies such as weighted stock market or treasury bill yields.