Date of Award

2013

Document Type

Thesis

Degree Name

Master of Science in Finance

Department

Business

First Advisor

James W. Boyd

Second Advisor

Stanley Coker

Third Advisor

Robert E. Allen

Abstract

Natural gas and coal are important energy sources in the United States. Both energy sources are substantially used in heavy industry, daily activities, and other areas of consumption. However, no significant research has been done to investigate the impact of changes in coal and gas prices on the stock market. Using multiple regression this research finds that inflation unadjusted and inflation adjusted coal price changes are statistically significant in predicting S&P 500 index changes. Results for inflation unadjusted and inflation adjusted natural gas price changes showed that gas price changes are statistically insignificant in predicting S&P 500 index changes in a fully specified model. However, inflation adjusted natural gas price changes are statistically significant in predicting S&P 500 index in a reduced model where only coal and natural gas prices are included. Inflation unadjusted and inflation adjusted control variables (crude oil, GDP, and gold) for this research are not statistically significant in predicting S&P 500 index changes. Sensitivity tests based on full model and reduced model F-tests results confirm the findings of the multiple regression model results. The reasoning behind the inflation unadjusted and inflation-adjusted comparison was to account for possible differences in results between nominal and real price changes.

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