Relationship between oil prices and perceived investment potential in the hospitality industry

The purpose of this study was threefold: first, to investigate the relationship between the perceived investment potential of restaurant corporations located in Texas, Oklahoma and Louisiana in relation to the declining spot-market price of West Texas Intermediate crude oil; second, to investigate the relationship between the perceived investment potential of restaurant corporations located in Texas, Oklahoma and Louisiana in relation to the Dow Jones Industrial Average; third, to determine if investors viewed a difference between investing in restaurant corporations located in Texas, Oklahoma and Louisiana and investing in restaurant corporations located in other parts of the United States.

These relationships were investigated for a seven month period commencing November 1, 1985 and ending June 30, 1986. The results of this study indicate that the declining oil prices did not play a major role in investors perceptions of future profitability of restaurant corporations located in Texas, Oklahoma and Louisiana. The results also indicate that the same factor which has caused the stock prices of the entire stock market to increase in value has also caused the stock price of these restaurant corporations to increase in value. The results also indicate that investors perceive no difference between investing in restaurant corporations located in Texas, Oklahoma and Louisiana and restaurant corporations located in other parts of the United States.