 The asset pricing implications of global oil price uncertainty: Evidence from the cross-section of Chinese stock returnsTeng Zhang, Zhiwei Xu and Jiaqi Li Energy, 2023, vol. 285, issue C Abstract: This study examines the role of global oil price uncertainty in the cross-sectional pricing of individual stocks in the Chinese stock market, motivated by the intertemporal capital asset pricing model. Using both Fama-Macbeth regressions and multifactor time-series regressions, we find that stocks with higher oil price uncertainty betas have significantly lower expected returns. This finding is consistent with the asset pricing implications of the demand of investors for stocks with high potential to hedge against oil price uncertainty. We further conduct an industry analysis and find that the negative association between the oil price uncertainty beta and expected returns is pronounced, primarily in the Manufacturing and Transportation & Communication industries. Moreover, we demonstrate that the return predictability of the oil price uncertainty beta cannot be subsumed by those of other oil-related betas and well-known macro-uncertainty betas, thus supporting that global oil price uncertainty is an independent source of systematic risk in the Chinese stock market. Keywords: Oil price uncertainty; Systematic risk; Intertemporal capital asset pricing model; Cross-sectional pricing; Energy finance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:285:y:2023:i:c:s0360544223028013 DOI: 10.1016/j.energy.2023.129407 Access Statistics for this article Energy is currently edited by Henrik Lund and Mark J. Kaiser More articles in Energy from Elsevier |
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