Oil price uncertainty, global industry returns and active investment strategies

Riza Demirer, Aydin Yuksel and Asli Yuksel

The Journal of Economic Asymmetries, 2020, vol. 22, issue C

Abstract: This paper shows that time-varying oil return volatility predicts regime transitions across a majority of global stock sectors, particularly for durables, financials, industrials, oil & gas, telecommunications and utilities. Global stock sectors yield significantly higher returns during periods of low oil market uncertainty and an active, forward-looking investment strategy conditional on the state of oil market volatility yields significantly positive excess returns even after adjusting for systematic risk exposures. The findings show that the predictive information captured by oil market fundamentals can be utilized in active sector rotation strategies.

Keywords: Global sector indices; Oil volatility; Markov switching; Predictability (search for similar items in EconPapers)
JEL-codes: G11 G15 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:22:y:2020:i:c:s1703494920300244

DOI: 10.1016/j.jeca.2020.e00177

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