Oil Price Shocks and Stock Return Predictability
Working paper
Åpne
Permanent lenke
http://hdl.handle.net/11250/227264Utgivelsesdato
2009-11Metadata
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- Discussion papers (FOR) [569]
Sammendrag
Recent research has documented that oil price changes lead the aggregate market
in most industrialized countries, and has argued that it represents an anomaly - an
underreaction to information that investors can profit from. I identify oil price
changes that are caused by exogenous events and show that it is only these oil price
changes that predict stock returns. The exogenous events usually correspond to
periods of extreme turmoil - either military con
icts in the Middle East or OPEC
collapses. Given the source of the predictability, I question its usefulness as a trading
strategy and its representation as an anomaly.