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Dynamic impacts of online investor sentiment on international crude oil prices

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  • Zhao, Lu-Tao
  • Xing, Yue-Yue
  • Zhao, Qiu-Rong
  • Chen, Xue-Hui

Abstract

In recent years, international crude oil prices have been subject to unusually high fluctuations due to the ravages of the COVID-19 epidemic. Under such extreme market conditions, online investor sentiment can strengthen the correlation between oil price changes and external events. We use a (rolling-window) structural vector autoregression method to investigate the dynamic impact of online investor sentiment on WTI crude oil prices before and after the COVID-19 pandemic across multiple topics of price, supply, demand, and so on, which aims to explore the fluctuation mechanism driven by sentiment and the price changes triggered by public health events. The proposed aspect-level sentiment analysis approach can effectively distinguish and measure sentiment scores of different aspects of the oil market. Our results show that the constructed oil price prosperity index contributes 49.84% to the long-term fluctuations of WTI oil price, ranking first among the influencing factors considered. In addition, the peak value of impulse shocks to WTI oil prices rose from 6.47% to 8.40% during the period of dramatic price volatility caused by the epidemic. The results sketch the mechanisms by which investor sentiment can affect crude oil prices, which help policymakers and investors protect against extreme risks in the oil market.

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  • Zhao, Lu-Tao & Xing, Yue-Yue & Zhao, Qiu-Rong & Chen, Xue-Hui, 2023. "Dynamic impacts of online investor sentiment on international crude oil prices," Resources Policy, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:jrpoli:v:82:y:2023:i:c:s0301420723002143
    DOI: 10.1016/j.resourpol.2023.103506
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    1. Sarit Maitra & Vivek Mishra & Sukanya Kundu & Manav Chopra, 2023. "Econometric Model Using Arbitrage Pricing Theory and Quantile Regression to Estimate the Risk Factors Driving Crude Oil Returns," Papers 2309.13096, arXiv.org, revised Oct 2023.

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