This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Risk-adjusted forecasts of oil prices

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Patrizio Pagano () (Bank of Italy, via Nazionale 91, I - 00184 Rome, Italy.)
Massimiliano Pisani () (Bank of Italy, via Nazionale 91, I - 00184 Rome, Italy.)

Additional information is available for the following registered author(s):

Abstract

This paper documents the existence of a significant forecast error on crude oil futures. We interpret it as a risk premium, which, in part, could have been explained by means of a real-time US business cycle indicator, such as the degree of capacity utilization in manufacturing. This result is robust to the specification of the estimating equation and to the considered business cycle indicator. An out-of-the-sample prediction exercise reveals that futures adjusted to take into account this time-varying component produce significantly better forecasts than those of unadjusted futures, of futures adjusted for the average forecast error and of the random walk, particularly at horizons of more than 6 months. JEL Classification: E37, E44, G13, Q4.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp999.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by European Central Bank in its series Working Paper Series with number 999.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 35 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:ecb:ecbwps:20090999

Contact details of provider:
Postal: Postfach 16 03 19, Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/home/html/index.en.html
More information through EDIRC

Order Information:
Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
Email:

For technical questions regarding this item, or to correct its listing, contact: (Official Publications).

Related research
Keywords: Oil; Forecasting; Futures.;

Other versions of this item:

This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Clark, Todd E. & McCracken, Michael W., 2001. "Tests of equal forecast accuracy and encompassing for nested models," Journal of Econometrics, Elsevier, vol. 105(1), pages 85-110, November. [Downloadable!] (restricted)
    Other versions:
  2. Ana Lamo & Javier J. Pérez & Ludger Schuknecht, 2008. "Public and private sector wages - co-movement and causality," Working Paper Series 963, European Central Bank. [Downloadable!]
  3. Fama, Eugene F & French, Kenneth R, 1988. " Business Cycles and the Behavior of Metals Prices," Journal of Finance, American Finance Association, vol. 43(5), pages 1075-93, December. [Downloadable!] (restricted)
  4. Sergey V. Chernenko, 2004. "The information content of forward and futures prices: market expectations and the price of risk," International Finance Discussion Papers 808, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  5. Shaun K. Roache, 2008. "Commodities and the Market Price of Risk," IMF Working Papers 08/221, International Monetary Fund. [Downloadable!]
  6. Guiso, Luigi & Parigi, Giuseppe, 1996. "Investment and Demand Uncertainty," CEPR Discussion Papers 1497, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. John Cochrane, 2005. "Financial Markets and the Real Economy," NBER Working Papers 11193, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Moosa, Imad A. & Al-Loughani, Nabeel E., 1994. "Unbiasedness and time varying risk premia in the crude oil futures market," Energy Economics, Elsevier, vol. 16(2), pages 99-105, April. [Downloadable!] (restricted)
  9. John H. Cochrane & Monika Piazzesi, 2005. "Bond Risk Premia," American Economic Review, American Economic Association, vol. 95(1), pages 138-160, March. [Downloadable!]
    Other versions:
  10. Bailey, Warren & Chang, K C, 1993. " Macroeconomic Influences and the Variability of the Commodity Futures Basis," Journal of Finance, American Finance Association, vol. 48(2), pages 555-73, June. [Downloadable!] (restricted)
  11. Finn, Mary G, 2000. "Perfect Competition and the Effects of Energy Price Increases on Economic Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 400-416, August.
  12. Menzie D. Chinn & Michael LeBlanc & Olivier Coibion, 2005. "The Predictive Content of Energy Futures: An Update on Petroleum, Natural Gas, Heating Oil and Gasoline," NBER Working Papers 11033, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Robert S. Pindyck, 2001. "The Dynamics of Commodity Spot and Futures Markets: A Primer," The Energy Journal, International Association for Energy Economics, vol. 22(3), pages 1-30.
  14. Sanders, Dwight R. & Boris, Keith & Manfredo, Mark, 2004. "Hedgers, funds, and small speculators in the energy futures markets: an analysis of the CFTC's Commitments of Traders reports," Energy Economics, Elsevier, vol. 26(3), pages 425-445, May. [Downloadable!] (restricted)
  15. Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2005. "'Some contagion, some interdependence': More pitfalls in tests of financial contagion," Journal of International Money and Finance, Elsevier, vol. 24(8), pages 1177-1199, December. [Downloadable!] (restricted)
    Other versions:
  16. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August. [Downloadable!] (restricted)
  17. Monika Piazzesi & Eric Swanson, 2004. "Future prices as risk-adjusted forecasts of monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Mar. [Downloadable!]
    Other versions:
  18. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
    Other versions:
  19. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November. [Downloadable!] (restricted)
  20. Robert B. Barsky & Lutz Kilian, 2002. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 137-198 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  21. Gary Gorton & K. Geert Rouwenhorst, 2004. "Facts and Fantasies about Commodity Futures," NBER Working Papers 10595, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alessio Anzuini & Patrizio Pagano & Massimiliano Pisani, 2007. "Oil supply news in a VAR: Information from financial markets," Temi di discussione (Economic working papers) 632, Bank of Italy, Economic Research Department. [Downloadable!]
Statistics
Access and download statistics

Did you know? All top Economics journals are listed on RePEc.

This page was last updated on 2009-11-12.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.