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This is a presentation on the 2007 Oil Spike as it relates to the efficiency of capital markets. It analyzes the spike as it compares to several market indexes, as well as several industry indexes. …

This is a presentation on the 2007 Oil Spike as it relates to the efficiency of capital markets. It analyzes the spike as it compares to several market indexes, as well as several industry indexes. This presentation explores correlations and effects of the spike.

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  • Today, we will be presenting our findings on how the oil spike of 2007 has impacted our financial markets, and subsequently market efficiency.  

Transcript

  • 1. The Oil Crisis Presented by: Max Snitkovsky Chris Zientek March 18 th , 2009
  • 2. Hypothesis
    • H 0 : β 1 ≈ β 2
      • Where β 1 = Correlation of oil prices and DJIA between 1986-present
      • Where β 2 = Correlation of oil prices and DJIA between January 2007- July 2008
    • The correlation between oil prices and stock market prices during incline of the oil spike are similar to the historical correlation
  • 3. β =-.05 R Squared= .002
  • 4. Gulf War Oil Oversupply
  • 5.  
  • 6.  
  • 7.  
  • 8.  
  • 9.  
  • 10.  
  • 11.  
  • 12.  
  • 13.  
  • 14. Southwest Hedging
    • 2007 was 95% hedged at $50/barrel
    • 2008 was 65% hedged at $49/barrel 
    • 2009 is over 50% hedged at $51/barrel
    • 2010 is over 25% hedged at $63/barrel
    • 2011 is over 15% hedged at $64/barrel
    • 2012 is 15% hedged at $63/barrel
  • 15.  
  • 16.  
  • 17. Percentage Price Changes 1986 - present β = -.013 R Squared= .0006
  • 18. β =.044 R Squared= .0039
  • 19. Questions?