Does oil and gold price uncertainty matter for the stock market?

W.F.M. Bams, G. Blanchard, Iman Honarvar Gheysary, T. Lehnert

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We proxy uncertainty in the stock oil and gold markets with the variance risk premia, extracted from futures and option contracts. We observe that an independent increase in the stock, oil or gold markets uncertainty coincides with negative returns in different industries. However, only the stock market uncertainty is a systematic priced factor in the entire cross section of stocks' expected returns. The oil price uncertainty is a sector-specific factor, and due to the industry segmentation of the market, it is only priced within oil-relevant industries. Gold price uncertainty is an asset-specific factor that is neither priced across nor within industries. (C) 2017 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)270-285
Number of pages16
JournalJournal of Empirical Finance
Volume44
DOIs
Publication statusPublished - Dec 2017

Fingerprint

Price uncertainty
Stock market
Gold price
Oil prices
Industry
Oil
Market uncertainty
Specific factors
Assets
Expected returns
Risk premia
Option contract
Cross section
Factors
Futures contracts
Segmentation
Uncertainty

Keywords

  • AVERSION
  • BOND
  • CONSISTENT COVARIANCE-MATRIX
  • CROSS-SECTION
  • EXPECTED RETURNS
  • HETEROSKEDASTICITY
  • LONG-RUN
  • SHOCKS
  • VARIANCE RISK PREMIA
  • VOLATILITY RISK

Cite this

Bams, W.F.M. ; Blanchard, G. ; Honarvar Gheysary, Iman ; Lehnert, T. / Does oil and gold price uncertainty matter for the stock market?. In: Journal of Empirical Finance. 2017 ; Vol. 44. pp. 270-285.
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keywords = "AVERSION, BOND, CONSISTENT COVARIANCE-MATRIX, CROSS-SECTION, EXPECTED RETURNS, HETEROSKEDASTICITY, LONG-RUN, SHOCKS, VARIANCE RISK PREMIA, VOLATILITY RISK",
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Does oil and gold price uncertainty matter for the stock market? / Bams, W.F.M.; Blanchard, G.; Honarvar Gheysary, Iman; Lehnert, T.

In: Journal of Empirical Finance, Vol. 44, 12.2017, p. 270-285.

Research output: Contribution to journalArticleAcademicpeer-review

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AU - Honarvar Gheysary, Iman

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AB - We proxy uncertainty in the stock oil and gold markets with the variance risk premia, extracted from futures and option contracts. We observe that an independent increase in the stock, oil or gold markets uncertainty coincides with negative returns in different industries. However, only the stock market uncertainty is a systematic priced factor in the entire cross section of stocks' expected returns. The oil price uncertainty is a sector-specific factor, and due to the industry segmentation of the market, it is only priced within oil-relevant industries. Gold price uncertainty is an asset-specific factor that is neither priced across nor within industries. (C) 2017 Elsevier B.V. All rights reserved.

KW - AVERSION

KW - BOND

KW - CONSISTENT COVARIANCE-MATRIX

KW - CROSS-SECTION

KW - EXPECTED RETURNS

KW - HETEROSKEDASTICITY

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