We investigate whether oil-price uncertainty helps forecast the international stock returns
of ten advanced and emerging countries. We consider an out-of-sample period of August 1925
to September 2021, with an in-sample period between August 1920 and July 1925, and employ a
quantile-predictive-regression approach, which is more informative relative to a linear model, as
it investigates the ability of oil-price uncertainty to forecast the entire conditional distribution of
stock returns Based on a recursive estimation scheme, we draw the following main conclusions:
the quantile-predictive-regression approach using oil-price uncertainty as a predictor statistically
outperforms the corresponding quantile-based constant-mean model for all ten countries at certain
quantiles (capturing normal, bear, and bull markets), and over specific forecast horizons, compared to
forecastability being detected for eight countries under the linear predictive model. Importantly, we
detect forecasting gains in many more horizons (at particular quantiles) compared to the linear case.
In addition, an oil-price uncertainty-based state-contingent spillover analysis reveals that the ten
equity markets are connected more tightly at the upper regime, suggesting that heightened oil-market
volatility erodes the benefits from diversification across equity markets.
DATA AVAILABILITY STATEMENT : Data is available from the authors upon request.