Changes in oil prices predict stock market returns worldwide. We find significant predictability in both developed and emerging markets. These results cannot be explained by time-varying risk premia as oil price changes also significantly predict negative excess returns. Investors seem to...

This study provides empirical support for theoretical models that allow for time-varying rare disaster risk. Using a database of 447 international political crises during the period 1918-2006, we create a crisis index that shows substantial variation over time. Changes in this crisis index, our...