Tail Risk of International Equity Market and Oil Volatility

This article constructs a tail risk index of international stock market using method of Kelly and Jiang (2014). Both out-of-sample results and economic value analysis show tail risk of international stock market is informative about oil volatility. After controlling for EMV variable, tail risk of international stock market is still useful for predicting oil volatility. Our results prove that tail risk could provide incremental information for the relationship between stock and oil volatility