Oil Industry Profits examines the profitability of the oil industry over the fifteen-year period from 1961 to 1975 using data from accounting reports and stock prices. Sunder’s analysis of accounting data supports the conclusion that the oil industry had been no more profitable than other industrial firms during the past fifteen years. His analysis of the stock market data indicates that the risk-adjusted profits to the investor during this period have been slightly greater than the average profits for all firms listed on the New York Stock Exchange. The small positive abnormal profits realized over the fifteen-year period may be attributed to a small improvement in the prospects of the industry over these years. Because of the competitive nature of the stock market, stock prices reflect the investors’ assessments of an industry’s future prospects, and abnormal profits appear only in periods when those prospects change.
