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The oil price risk and global stock returns

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  • Azimli, Asil

Abstract

This study investigates the oil price risk exposure of stock level returns for 23 developed financial markets from July 1990 to March 2019. The oil price factor is included into the factor-based asset pricing framework as a pricing factor and tested against returns on global portfolios sorted by different fundamental variables such as size and book-to-market (B/M), size and profitability and size and investment. The oil price risk model is also tested against the aggregate market returns of five major regions, namely the US, Asia Pacific, North America, Japan and Europe. The results show that the oil price risk is not an influential pricing factor within the framework of factor-based asset pricing models. The information content of the oil price factor can be easily subsumed by the established asset pricing factors. The findings are robust against different pricing models and multiple test statistics.

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  • Azimli, Asil, 2020. "The oil price risk and global stock returns," Energy, Elsevier, vol. 198(C).
    • Handle: RePEc:eee:energy:v:198:y:2020:i:c:s0360544220304278
    DOI: 10.1016/j.energy.2020.117320
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    7. Zhang, Teng & Xu, Zhiwei & Li, Jiaqi, 2023. "The asset pricing implications of global oil price uncertainty: Evidence from the cross-section of Chinese stock returns," Energy, Elsevier, vol. 285(C).
    8. Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Karikari, Nana Kwasi & Hammoudeh, Shawkat, 2022. "Time-varying dependence dynamics between international commodity prices and Australian industry stock returns: a Perspective for portfolio diversification," Energy Economics, Elsevier, vol. 108(C).
    9. Asil Azimli, 2022. "Oil price risk and the cross‐section of stock returns in Turkey," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4105-4122, October.

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