Firm return volatility and economic gains: the role of oil prices

Paresh Kumar Narayan, Susan Sunila Sharma

Research output: Contribution to journalArticleResearchpeer-review

112 Citations (Scopus)

Abstract

In this paper we investigate whether the oil price contributes to stock return volatility for 560 firms listed on the NYSE. Using daily data, we find that the oil price is a significant determinant and predictor of firm return variance. We devise trading strategies based on forecasts of firm return variance using the oil prices and historical averages. We find that investors can make substantial gains in returns by using the oil price in forecasting firm return variances.

Original languageEnglish
Pages (from-to)142-151
Number of pages10
JournalEconomic Modelling
Volume38
DOIs
Publication statusPublished - Feb 2014
Externally publishedYes

Keywords

  • Firm return volatility
  • NYSE
  • Oil price
  • Time series

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