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Global tail risk and oil return predictability

Author

Listed:
  • Qian, Lihua
  • Zeng, Qing
  • Lu, Xinjie
  • Ma, Feng

Abstract

This paper mainly investigates whether the global tail risk, World Fear of Hollstein et al. (2019), contains valuable information for oil return prediction. With economic constraint approaches, World Fear can provide incremental content compared to most of the given macro variables to predict oil returns. The analysis based on business cycles highlights the World Fear's satisfactory performances during recessions. In addition, the multi-period forecasts further confirm the satisfactory predictability of the World Fear for oil return. Our results shed new insights for the oil market from the perspective of global tail risk.

Suggested Citation

  • Qian, Lihua & Zeng, Qing & Lu, Xinjie & Ma, Feng, 2022. "Global tail risk and oil return predictability," Finance Research Letters, Elsevier, vol. 47(PB).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322001027
    DOI: 10.1016/j.frl.2022.102790
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    References listed on IDEAS

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    Cited by:

    1. Zhong, Juandan & Cao, Wenhan & Tang, Yusui, 2023. "Tail risk of international equity market and oil volatility," Finance Research Letters, Elsevier, vol. 58(PA).
    2. Lu, Xinjie & Zeng, Qing & Zhong, Juandan & Zhu, Bo, 2024. "International stock market volatility: A global tail risk sight," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    3. Wang, Cheng & Bouri, Elie & Xu, Yahua & Zhang, Dingsheng, 2023. "Intraday and overnight tail risks and return predictability in the crude oil market: Evidence from oil-related regular news and extreme shocks," Energy Economics, Elsevier, vol. 127(PB).
    4. Lv, Wendai & Wu, Qian, 2022. "Global economic conditions index and oil price predictability," Finance Research Letters, Elsevier, vol. 48(C).
    5. Nekhili, Ramzi & Foglia, Matteo & Bouri, Elie, 2023. "European bank credit risk transmission during the credit Suisse collapse," Finance Research Letters, Elsevier, vol. 58(PB).
    6. Yang, Liuyong & Long, Yijia & Long, Huaigang & Zaremba, Adam & Zhou, Wenyu, 2022. "Is tail risk priced in the cross-section of Chinese mutual fund returns?," Finance Research Letters, Elsevier, vol. 50(C).

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