Real oil prices and the international sign predictability of stock returns

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We study the role of real oil prices on the directional predictability of excess stock market returns in the U.S. and 10 other countries using probit models. Previous studies have shown that oil price shocks have adverse effects on stock returns. We extend this literature by focusing on the sign component of excess returns. Our findings indicate that real oil prices are useful predictors of the direction of stock returns in a number of markets over and above commonly used predictors, but results vary substantially between countries. Interestingly, we find only limited evidence of asymmetric effects of oil price shocks.
Original languageEnglish
JournalFinance research letters
Pages (from-to)79-87
Number of pages9
Publication statusPublished - 31 May 2016
MoE publication typeA1 Journal article-refereed

Fields of Science

  • 511 Economics

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