Global tail risk and oil return predictability

•This paper mainly investigates the predictability of the global tail risk to oil return.•World Fear can provide incremental content than most of the given macro variables to predict oil returns.•The analysis based on business cycles highlights the World Fear's satisfactory performances during...

Full description

Saved in:
Bibliographic Details
Published in:Finance research letters 2022-06, Vol.47, p.102790, Article 102790
Main Authors: Qian, Lihua, Zeng, Qing, Lu, Xinjie, Ma, Feng
Format: Article
Language:English
Subjects:
Business cycles
Oil market
Return prediction
Tail risk
World fear
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:•This paper mainly investigates the predictability of the global tail risk to oil return.•World Fear can provide incremental content than 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.•The multi-period forecasts further confirm the satisfactory predictability of the World Fear for oil return. 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.
ISSN:1544-6123
1544-6131
DOI:10.1016/j.frl.2022.102790