An analysis of oil and gas industry registered in Islamabad Stock Exchange (ISE) with perspects of risk and return

Abstract

This research paper is on the analysis of Oil and Gas Exploratory industry registered with Islamabad Stock Exchange. There are four companies in this industry and their risk and return analysis has been done through two models; mean, standard deviation and CAPM. The significance of this study is the relationship between risk and return i.e. direct relation. This means higher risk reveals higher return and vice versa. This relationship has been proved by CAPM and through empirical evidence from market fluctuations of stocks and stock market index. Quantitative and qualitative both type of research has been done. In the quantitative research the analysis has been done by taking statistical data from stock exchange index, companies’ historical returns from financial websites, and companies’ annual reports. The qualitative analysis has been done from the stock market behavior and the stock price fluctuations. Five years data has been taken from 2008 to 2012. There are three stock exchanges in Pakistan but only ISE has been taken for the study. Two variables have been taken from the literature review, risk and return, and their relationship has been proved from the calculations through standard deviation and CAPM. Beta is a measure of volatility or uncertainty which is also known as systematic risk. Market Beta is always equals to one and the stock beta is always compared to the standard benchmark of the market beta, 1.