Oil Price Shocks and Stock Return Predictability
AbstractRecent 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 conflicts 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.
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Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2009/13.
Length: 46 pages
Date of creation: 11 Nov 2009
Date of revision:
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Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
More information through EDIRC
Oil Price; Stock Markets;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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