Oil Price Returns Skewness and Forecastability of International Stock Returns Over One Century of Data

Afees Salisu and Rangan Gupta

No 202339, Working Papers from University of Pretoria, Department of Economics

Abstract: This study examines the out-of-sample predictability of expected skewness of oil price returns for stock returns of 10 (8 advanced plus 2 emerging) countries using long-range monthly data of over a century for each country. Using a distributed lag predictive econometric model, which controls for endogeneity, persistence, and conditional heteroscedasticity, we provide evidence of the strong statistical significance of the predictive impact of the third moment of oil price returns for equity returns for all the countries across various forecast horizons and length of out-of-sample periods. These findings also continue to hold for the shorter sample periods of 3 other emerging markets: Brazil, China and Russia. Our findings have important implications for academics, investors and policymakers.

Keywords: Stock returns; expected skewness of oil returns; forecasting; advanced and emerging equity markets (search for similar items in EconPapers)
JEL-codes: C22 G15 G17 Q02 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2023-12
New Economics Papers: this item is included in nep-cis, nep-ene and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202339

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