We examine how industry returns react to various oil shocks developed in Baumeister and Hamilton (2019) and find that oil supply shocks matter as much, if not more, as oil demand and economic activity shocks in driving industry returns. A long-short portfolio that buys (sells) industries...

The extant literature demonstrates the importance of stock return predictability for portfolio allocation. The usefulness of incorporating return predictability into portfolio decisions is most evident for Bayesian investors who build their portfolios based on their prior beliefs. I show that...