tailieunhanh - Stock Return Predictability and Oil Prices

Excellent surveys of recent work in behavioral asset pricing include Hirshleifer (2001) and Barberis and Thaler (2003). In this paper, we do not attempt to be either as balanced or as comprehensive as these authors. Rather, we adopt the role of advocates, and argue in favor of one particular class of heterogeneous-agent models, which we call “disagreement” models. This category is fairly broad, encompassing work that has focused on the following underlying mechanisms: i) gradual information flow; ii) limited attention; and iii) heterogeneous priors. While these three mechanisms each have their own distinct features,. | INSTITUTO DE ECONOMÍA DOCUMENTO de TRABAJO 406 2011 Stock Return Predictability and Oil Prices Jaime Casassus Freddy Higuera. ISSN edición impresa 0716-7334 ISSN edición electronica 0717-7593 Version impresa ISSN 0716-7334 Version electrónica ISSN 0717-7593 PONTIFICIA UNIVERSIDAD CATOLICA DE CHILE INSTITUTO DE ECONOMIA Oficina de Publicaciones Casilla 76 Correo 17 Santiago STOCK RETURN PREDICTABILITY AND OIL PRICES Jaime Casassus Freddy Higuera Documento de Trabajo N 406 Santiago Diciembre 2011 jcasassus@ INDEX ABSTRACT I. INTRODUCTION 1 II. OIL PRICE THE BUSINESS CYCLE AND EXCESS MARKET RETURNS 4 A. Oil price and the macroeconomy 4 B. Oil price and the financial market 6 C. Stock returns and the business cycle 7 D. Measuring oil price shocks 9 E. Oil price the business cycle and stock returns 10 III. SHORT-HORIZON PREDICTABILITY OF STOCK RETURNS 11 IV. OUT-OF-SAMPLE PREDICTABILITY OF STOCK RETURNS 14 V. LONG-HORIZON PREDICTABILITY OF STOCK RETURNS 20 VI. IMPLICATIONS FOR THE CROSS-SECTION OF EXPECTED RETURNS 22 VII. CONCLUSIONS 27 REFERENCES .