THE IMPACT OF SYSTEMATIC & UN SYSTEMATIC RISK ON STOCK RETURNS (OIL & GAS SECTOR) IN PAKISTAN

Abstract

Purpose The research purpose is to examine the impact of Systematic and un-Systematic risk on stock returns (Oil & Gas Sector)in Pakistan. Methodology & Design i The research design is based on quantitative and longitudinal research in which Secondary data is used to determine the cause and effect of the Systematic and un-Systematic risk on stock returns (Oil & Gas Sector), there were interest rate risk, inflation risk, liquidity risk and credit risk that considered panel least square methodology to examine top 10 companies (listed in KSE-100 Index) data ranging from 2013-2018 in which only privately owned companies were taken which had the same size of business in nature with respect to the category of the privately owned scheduled commercial oil and gas industries operating in Pakistan. Findings The findings explained that deposits do not have any significant impact upon Stock Return whereas rest of variables interest rate risk, inflation risk, liquidity risk and credit risk were found significant. Limitations Top two systematical private commercial companies in Pakistan (KSE-100 Index) are consider in this study, future research can be carried out on large sample size. The data taken for the study is for only past 6 years i.e. 2012-2018 due to unavailability of the data on the Oil and gas official website database. Comparative study among different types of companies is completely skipped off future studies can fill that gap by doing comparative study of nature. This study does not include any external macro-economic indicators only top two private sector commercial companies were included in the study. Recommendations Stock returns are insignificant with relation to risk in this study because concerned parties do not have much problems in maintaining OGDCL (oil and gas Development Company limited) prescribed stock reserves. Although, to avoid uncertainty OGDCL needs to provide deposit stock return on the bases of risk either systematic or un-systematic. Profitability is significant to stock in this study, so policy makers and senior managers need to have systematic risk management strategies in the operations of the company limited. Company Size has been found significant to stock return in this study, so policy makers and C.E.O need to maintain higher stock return by ensuring and creating customer relationships with depositors and investors to attract more returns in terms of profits.