Commodity Risk and Forecastability of International Stock Returns: The Role of Oil Returns Skewness
Year: 2025
Type: article
Abstract: This study examines the out-of-sample predictability of expected skewness of oil price returns, which serves as a metric for global future risks, as we show statistically through the association with crises of different nature, for stock returns of 10 (8 advanced plus two emerging) countries using long-range monthly data of over a century for each country. Using a distributed lag predictive econometric model, which controls for endogeneity, persistence, and conditional heteroscedasticity, we provide evidence of the strong statistical significance of the predictive impact of the third moment of oil price returns for equity returns for all the countries across various forecast horizons and the length of out-of-sample periods. These findings also hold for the shorter sample periods of 3 other emerging markets: Brazil, China, and Russia. Our findings have important implications for academics, investors, and policymakers.
Source: Risks
Authors: Afees A. Salisu, Rangan Gupta
Institutions: University of Ibadan, University of Pretoria
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $2,172
OpenAlex ID: W4408187273