US Industry-Level Returns and Oil Prices

Qinbin Fan and Mohammad Jahan-Parvar

MPRA Paper from University Library of Munich, Germany

Abstract: This paper takes a closer look at the puzzle uncovered by Driesprong et al. (2008) and finds empirical support for the "oil effect" in equity returns. Using forty nine US industry-level returns series and changes in oil spot and future prices, we address whether industry-level returns are predictable. We find that using changes in oil spot prices, the answer is yes; but for just under a fifth of industries in our sample. We find weak support for the predictability of industry-level returns based on changes in oil futures prices. Our findings are consistent with the delayed reaction to new information, a variant of Hong and Stein (1996)'s "underreaction" hypothesis.

Keywords: Industry-level returns; Oil prices; Return predictability; Underreaction (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-bec and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: U.S. industry-level returns and oil prices (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:15670

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