Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of Data
We investigate whether oil-price uncertainty helps forecast the international stock returns of ten advanced and emerging countries. We consider an out-of-sample period of August 1925 to September 2021, with an in-sample period between August 1920 and July 1925, and employ a quantile-predictive-regre...
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| Format: | Article |
| Language: | English |
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MDPI AG
2022-11-01
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| Series: | Energies |
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| Online Access: | https://www.mdpi.com/1996-1073/15/22/8436 |
| _version_ | 1797465429660139520 |
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| author | Mehmet Balcilar Rangan Gupta Christian Pierdzioch |
| author_facet | Mehmet Balcilar Rangan Gupta Christian Pierdzioch |
| author_sort | Mehmet Balcilar |
| collection | DOAJ |
| description | We investigate whether oil-price uncertainty helps forecast the international stock returns of ten advanced and emerging countries. We consider an out-of-sample period of August 1925 to September 2021, with an in-sample period between August 1920 and July 1925, and employ a quantile-predictive-regression approach, which is more informative relative to a linear model, as it investigates the ability of oil-price uncertainty to forecast the entire conditional distribution of stock returns Based on a recursive estimation scheme, we draw the following main conclusions: the quantile-predictive-regression approach using oil-price uncertainty as a predictor statistically outperforms the corresponding quantile-based constant-mean model for all ten countries at certain quantiles (capturing normal, bear, and bull markets), and over specific forecast horizons, compared to forecastability being detected for eight countries under the linear predictive model. Importantly, we detect forecasting gains in many more horizons (at particular quantiles) compared to the linear case. In addition, an oil-price uncertainty-based state-contingent spillover analysis reveals that the ten equity markets are connected more tightly at the upper regime, suggesting that heightened oil-market volatility erodes the benefits from diversification across equity markets. |
| first_indexed | 2024-03-09T18:22:18Z |
| format | Article |
| id | doaj.art-3b06b52a63c24082955374866b30f34f |
| institution | Directory Open Access Journal |
| issn | 1996-1073 |
| language | English |
| last_indexed | 2024-03-09T18:22:18Z |
| publishDate | 2022-11-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj.art-3b06b52a63c24082955374866b30f34f2023-11-24T08:13:04ZengMDPI AGEnergies1996-10732022-11-011522843610.3390/en15228436Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of DataMehmet Balcilar0Rangan Gupta1Christian Pierdzioch2Department of Economics, Eastern Mediterranean University, Turkish Republic of North Cyprus, Via Mersin 10, Famagusta 99628, TurkeyDepartment of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South AfricaDepartment of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, GermanyWe investigate whether oil-price uncertainty helps forecast the international stock returns of ten advanced and emerging countries. We consider an out-of-sample period of August 1925 to September 2021, with an in-sample period between August 1920 and July 1925, and employ a quantile-predictive-regression approach, which is more informative relative to a linear model, as it investigates the ability of oil-price uncertainty to forecast the entire conditional distribution of stock returns Based on a recursive estimation scheme, we draw the following main conclusions: the quantile-predictive-regression approach using oil-price uncertainty as a predictor statistically outperforms the corresponding quantile-based constant-mean model for all ten countries at certain quantiles (capturing normal, bear, and bull markets), and over specific forecast horizons, compared to forecastability being detected for eight countries under the linear predictive model. Importantly, we detect forecasting gains in many more horizons (at particular quantiles) compared to the linear case. In addition, an oil-price uncertainty-based state-contingent spillover analysis reveals that the ten equity markets are connected more tightly at the upper regime, suggesting that heightened oil-market volatility erodes the benefits from diversification across equity markets.https://www.mdpi.com/1996-1073/15/22/8436international stock marketsoil price uncertaintyforecastingquantile regression |
| spellingShingle | Mehmet Balcilar Rangan Gupta Christian Pierdzioch Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of Data Energies international stock markets oil price uncertainty forecasting quantile regression |
| title | Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of Data |
| title_full | Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of Data |
| title_fullStr | Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of Data |
| title_full_unstemmed | Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of Data |
| title_short | Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of Data |
| title_sort | oil price uncertainty and international stock returns dissecting quantile based predictability and spillover effects using more than a century of data |
| topic | international stock markets oil price uncertainty forecasting quantile regression |
| url | https://www.mdpi.com/1996-1073/15/22/8436 |
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