Stock market return predictability revisited: Evidence from a new index constructing the oil market

Wang Chen, Julien Chevallier, Jiqian Wang and Juandan Zhong

Finance Research Letters, 2022, vol. 49, issue C

Abstract: An increasing number of studies declare that oil volatility information exhibits superior forecasting performance for equity premiums. This study develops a new predictor, namely, RSJV, using the realized semi-variance framework to reflect the proportion of upward (downward) variance on a specific trading day. Our in-sample and out-of-sample results reveal that the RSJV can outperform the 14 popular macroeconomic indicators of Welch and Goyal (2008). Furthermore, our results reconfirm that the economic constraint can help to improve the accuracy of return predictability.

Keywords: Realized semi-variance; Return predictability; Equity premium; Information transmission (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003300

DOI: 10.1016/j.frl.2022.103106

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