A sectoral analysis of asymmetric nexus between oil price and stock returns

Salisu, Afees A.; Raheem, Ibrahim D.; Ndako, Umar B.

doi:10.1016/j.iref.2019.02.005

Cited by 68 publications

(41 citation statements)

References 77 publications

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“…For completeness, we also account for some other important factors that can influence stock returns (see also Bannigidadmath and Narayan 2015;Narayan et al 2016;Devpura, Narayan, and Sharma 2018;Salisu, Swaray, and Oloko 2019a, 2019b, 2019c, 2019d. The Arbitrage Pricing Theory offers the theoretical basis for incorporating systemic or macroeconomic risks in the predictability of stock returns.…”

Section: Some Empirical Applications Of the Global Fear Index For Covid-19mentioning

confidence: 99%

Constructing a Global Fear Index for the COVID-19 Pandemic

Salisu

Akanni

2020

Emerging Markets Finance and Trade

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214

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This paper offers two main innovations. First, we construct a global fear index (GFI) for the COVID-19 pandemic to support economic, financial, and policy analyses in this area. Second, we demonstrate the application of the index to stock return predictability using OECD data. The panel data predictability results reveal the significance of the index as a good predictor of stock returns during the pandemic. Also, we find that accounting for "asymmetry" effect and macro (common) factors improves the forecast performance of the GFI-based predictive model for stock returns. With regular updates and improvements of the index, several empirical analyses can be extended to other macroeconomic fundamentals in future research.

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Section: Some Empirical Applications Of the Global Fear Index For Covid-19mentioning

confidence: 99%

Constructing a Global Fear Index for the COVID-19 Pandemic

Salisu

Akanni

2020

Emerging Markets Finance and Trade

Self Cite

214

184

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“…One key highlight of the OPW results is the difference in hedging effectiveness between ETFs and oil price risk particularly during the current pandemic. This is expected because sectoral responses and resistance vary due to different economic conditions and political events that are capable of influencing each sector (see Salisu et al 2019a , b , c ; Chang et al 2020 ).…”

Section: Discussionmentioning

confidence: 99%

COVID-19 pandemic and the crude oil market risk: hedging options with non-energy financial innovations

Salisu

Obiora²

2021

Financ Innov

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This study examines the hedging effectiveness of financial innovations against crude oil investment risks, both before and during the COVID-19 pandemic. We focus on the non-energy exchange traded funds (ETFs) as proxies for financial innovations given the potential positive correlation between energy variants and crude oil proxies. We employ a multivariate volatility modeling framework that accounts for important statistical features of the non-energy ETFs and oil price series in the computation of optimal weights and optimal hedging ratios. Results show evidence of hedging effectiveness for the financial innovations against oil market risks, with higher hedging performance observed during the pandemic. Overall, we show that sectoral financial innovations provide resilient investment options. Therefore, we propose that including the ETFs in an investment portfolio containing oil could improve risk-adjusted returns, especially in similar financial crisis as witnessed during the pandemic. In essence, our results are useful for investors in the global oil market seeking to maximize risk-adjusted returns when making investment decisions. Moreover, by exploring the role of structural breaks in the multivariate volatility framework, our attempts at establishing robustness for the results reveal that ignoring the same may lead to wrong conclusions about the hedging effectiveness.

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“…Some studies have examined the factors affecting changes in oil prices, and other studies have examined the effects of oil prices on the macroeconomic variables in different countries and markets, such as the stock market. Various domestic and foreign studies have examined the effects of oil prices on the total capital market (Fang & You, 2014;Wang, Wu & Yang, 2013;Abonori & Ziaodin, 2020) as well as various stock market industries (Kumar, 2017;Mamipour & Feli, 2017;Salisu, The Dynamic Impact of Oil Price on Investor Sentiment in… Raheem, & Ndako, 2019) or stock market companies (Malik & Ewing, 2009).…”

Section: Research Backgroundmentioning

confidence: 99%