[en] In this paper, I hypothesize that oil price uncertainty, e.g. proxied by OPEC news, affect expectations about equity volatility. I find that oil price uncertainty has a low correlation with contemporaneous US equity market volatility but has an economically significant negative impact on expected returns. Overall, an OPEC news-managed US equity portfolio generates an annualized equity-risk-adjusted alpha of more than 5% and significantly outperforms an equity- and oil-volatility-managed portfolio. Furthermore, I find that oil price uncertainty affects volatility expectations. An OPEC news-managed portfolio that buys (sells) S&P500 straddles when OPEC news is high (low) outperforms a realized volatility-managed straddle portfolio.
Disciplines :
Finance
Author, co-author :
LEHNERT, Thorsten ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Finance (DF)
External co-authors :
no
Language :
English
Title :
OPEC News and Volatility Expectations
Publication date :
11 December 2024
Event name :
The 2024 International Conference on Sustainability, Environment, and Social Transition in Economics and Finance (SESTEF 2024)
