Can energy prices predict stock returns? An extreme bounds analysis

Jae Kim, Md Lutfur Rahman and Abul Shamsuddin ()

Energy Economics, 2019, vol. 81, issue C, 822-834

Abstract: We assess the predictive abilities of energy prices for future US stock market returns using Sala-i-Martin's (1997) extreme bounds analysis (EBA). The EBA results reveal that the predictive power of energy prices varies substantially across the regression models with different combinations of conditioning variables. Energy prices are not robust predictors for the stock returns in the whole sample period from June 1987 to April 2015. However, before the 2008 global financial crisis, energy prices exerted a moderate negative effect on future stock returns and their effects have become strongly positive afterwards. In general, the predictive power declines with the increase in forecast horizon and it varies considerably over time.

Keywords: Energy prices; Stock return predictability; Extreme bounds analysis (search for similar items in EconPapers)
JEL-codes: C22 G12 G17 Q43 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988319301835
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:eneeco:v:81:y:2019:i:c:p:822-834

DOI: 10.1016/j.eneco.2019.05.029

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().