Institutions and return predictability in oil-exporting countries

Sirio Aramonte, Mohammad Jahan-Parvar and Justin Shugarman

No 2015-14, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We study whether stock market returns in oil-exporting countries can be predicted by oil price changes, and we investigate the link between predictability and the quality of each country's institutions. Returns are predictable for half the countries we consider, and predictability is stronger when institutional quality is lower. We argue that the relation between predictability and institutional quality reflects the preference of countries with weaker institutions to consume oil windfalls locally rather than smooth out the impact of windfalls by, for instance, investing the proceeds through a sovereign wealth fund.

Keywords: Country studies; Quality of institutions; Return predictability (search for similar items in EconPapers)
JEL-codes: G12 O16 O50 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-02-18
New Economics Papers: this item is included in nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.federalreserve.gov/econresdata/feds/2015/files/2015014pap.pdf Full text (application/pdf)
http://dx.doi.org/10.17016/FEDS.2015.014 http://dx.doi.org/10.17016/FEDS.2015.014 (application/pdf)

Related works:
Journal Article: Institutions and return predictability in oil-exporting countries (2019)
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