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Price relationships in crude oil futures: new evidence from CFTC disaggregated data

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  • Julien Chevallier

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Abstract

This paper attempts to reconcile two strands of literature on oil and speculation: one that posits the predominance of supply/demand fundamentals, and one that investigates the hypothesis of speculative trading. To do so, we develop a Markov switching analysis based on the WTI crude oil futures price, CFTC disaggregated data, and fundamentals of the oil price. The benefits of this approach are twofold: (1) the model is able to track changes in the underlying business cycle, and (2) the model explicitly incorporates data on the net positions of money managers as a proxy for speculative activity. After verifying the sensitivity of our results to the inclusion of supply and demand factors on the oil market, we cannot eliminate statistically the possibility of speculation among the main reasons behind the 2008 oil price swing. We also explicitly recognize the influence of many other economic variables during that specific time period. Copyright Springer 2013

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Bibliographic Info

Article provided by Society for Environmental Economics and Policy Studies - SEEPS in its journal Environmental Economics and Policy Studies.

Volume (Year): 15 (2013)
Issue (Month): 2 (April)
Pages: 133-170

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Handle: RePEc:spr:envpol:v:15:y:2013:i:2:p:133-170

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Keywords: Crude oil futures; Speculation; CFTC disaggregated data; Markov-switching model; C32; G12; G15; Q43;

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Cited by:
  1. Julien Chevallier & Benoît Sévi, 2013. "A Fear Index to Predict Oil Futures Returns," Working Papers 2013.62, Fondazione Eni Enrico Mattei.

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