It's not that important: The negligible effect of oil market uncertainty

Libo Yin (), Jiabao Feng, Li Liu and Yudong Wang

International Review of Economics & Finance, 2019, vol. 60, issue C, 62-84

Abstract: Extensive literature has shown the predictability of stock returns based on various factors originating in the oil markets. We investigate the international stock return predictability at both daily and monthly frequencies from a new perspective of oil market uncertainties, which are measured by the oil volatility risk premium. In addition to traditional in-sample and out-of-sample analyses, a time-varying approach is also employed to identify the predictive characteristics of the oil market uncertainty. However, the empirical results suggest that there is a weak statistically significant effect of the oil market volatility on global stock returns. The results are essentially unchanged during cyclical expansions and recessions as well as during market periods with relatively high and low volatility. Even in the time-varying analysis, the stock return predictability based on the oil market uncertainty is still inferior. Generally, we shed some doubts on the stock return predictability based on the oil market uncertainty, which contrasts with the existing perspectives.

Keywords: Return predictability; Oil factors; Volatility risk premium; Out-of-sample forecast; Time-varying analysis (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056017307153
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:reveco:v:60:y:2019:i:c:p:62-84

DOI: 10.1016/j.iref.2018.12.019

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().