Oil and the short-term predictability of stock return volatility

Yudong Wang, Yu Wei, Chongfeng Wu and Libo Yin ()

Journal of Empirical Finance, 2018, vol. 47, issue C, 90-104

Abstract: The goal of this paper is to show that crude oil volatility is predictive of stock volatility in the short-term from both in-sample and out-of-sample perspectives. The revealed predictability is also of economic significance, as shown by examining the performance of portfolios constructed on the oil-based forecasts of stock volatility. Results from robustness tests suggest that oil volatility provides different information from traditional macro variables. Further analysis shows that simple linear regression is sufficient for capturing predictive relationships between oil and stock volatility. Oil volatility is found to predict return volatilities of a significant number of industry portfolios during recent periods.

Keywords: Crude oil volatility; Stock volatility; Predictive regression; Out-of-sample performance; Economic significance (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (103)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927539818300240
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:47:y:2018:i:c:p:90-104

DOI: 10.1016/j.jempfin.2018.03.002

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().