Munich Personal RePEc Archive

US stock market regimes and oil price shocks

Angelidis, Timotheos and Degiannakis, Stavros and Filis, George (2015): US stock market regimes and oil price shocks. Published in: Global Finance Journal No. 28 (2015): pp. 132-146.

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Abstract

The paper investigates the ability of oil price returns, oil price shocks and oil price volatility to provide predictive information on the state (high/low risk environment) of the US stock market returns and volatility. The disaggregation of oil price shocks according to their origin allows us to assess whether they contain incremental forecasting power compared to oil price returns. Overall, the results suggest that oil price returns and volatility possess the power to forecast the state of the US stock market returns and volatility. However, the full effects of oil price returns can only be revealed when the oil price shocks are disentangled and as such we claim that the oil price shocks have an incremental power in forecasting the state of the stock market. The findings are important for stock market forecasters and investors dealing with stock and derivatives markets.

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