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

Dennis Bams; Gildas Blanchard; Iman Honarvar; Thorsten Lehnert

doi:10.1016/j.jempfin.2017.07.003

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

Dennis Bams, Gildas Blanchard, Iman Honarvar^*, Thorsten Lehnert

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › Academic › peer-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 language	English
Pages (from-to)	270-285
Number of pages	16
Journal	Journal of Empirical Finance
Volume	44
DOIs	https://doi.org/10.1016/j.jempfin.2017.07.003
Publication status	Published - Dec 2017

Keywords

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

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Cite this

@article{001b89ab2bd746e6850fb40a97df03b1,

title = "Does oil and gold price uncertainty matter for the stock market?",

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.",

keywords = "VARIANCE RISK PREMIA, CONSISTENT COVARIANCE-MATRIX, VOLATILITY RISK, CROSS-SECTION, EXPECTED RETURNS, LONG-RUN, SHOCKS, AVERSION, BOND, HETEROSKEDASTICITY",

author = "Dennis Bams and Gildas Blanchard and Iman Honarvar and Thorsten Lehnert",

note = "data source: Data from the Commodity Research Bureau database are used, which are accessible through http://www.crbtrader.com/support/dcdl.asp",

year = "2017",

month = dec,

doi = "10.1016/j.jempfin.2017.07.003",

language = "English",

volume = "44",

pages = "270--285",

journal = "Journal of Empirical Finance",