Estimation and Forecast of the Models for Stock Market Performance of the Oil & Gas Companies in Pakistan

Stock market plays a very influential role for the economy of any country. Energy sector is considered as one of the dominating sectors in the stock market. This sector is evidently affected by oil and gas prices and performance of this sector is evaluated by stock returns of the oil & gas companies. Therefore, the study of such stock returns always remains an objective of interest for many financial researchers. In this article, we seek for some suitable mean and volatility models in order to characterize and forecast the stock market performance of those oil & gas exploration and distribution companies in Pakistan which are on the list of Karachi Stock Exchange. Weekly stock price data of 250 observations for 9 oil & gas companies have been obtained. Some appropriate ARIMA and GARCH models have been selected after using standard available criteria. Furthermore, the fitted models have also been evaluated for their forecast performance.