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The Predictive Content of Energy Futures: An Update on Petroleum, Natural Gas, Heating Oil and Gasoline

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  • Menzie D. Chinn
  • Michael LeBlanc
  • Olivier Coibion

Abstract

This paper examines the relationship between spot and futures prices for energy commodities (crude oil, gasoline, heating oil markets and natural gas). In particular, we examine whether futures prices are (1) an unbiased and/or (2) accurate predictor of subsequent spot prices. We find that while futures prices are unbiased predictors of future spot prices, with the exception those in the natural gas markets at the 3-month horizon. Futures do not appear to well predict subsequent movements in energy commodity prices, although they slightly outperform time series models.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11033.

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Date of creation: Jan 2005
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Handle: RePEc:nbr:nberwo:11033

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  1. Peter Isard & Ben Hunt & Douglas Laxton, 2001. "The Macroeconomic Effects of Higher Oil Prices," IMF Working Papers 01/14, International Monetary Fund.
  2. Herbert, John H., 1993. "The relation of monthly spot to futures prices for natural gas," Energy, Elsevier, vol. 18(11), pages 1119-1124.
  3. Serletis, Apostolos, 1991. "Rational expectations, risk and efficiency in energy futures markets," Energy Economics, Elsevier, vol. 13(2), pages 111-115, April.
  4. 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.
  5. W. David Walls, 1995. "An Econometric Analysis of the Market for Natural Gas Futures," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 71-84.
  6. John H. Cochrane, 1988. "Production Based Asset Pricing," NBER Working Papers 2776, National Bureau of Economic Research, Inc.
  7. Cochrane, John H, 1991. " Production-Based Asset Pricing and the Link between Stock Returns and Economic Fluctuations," Journal of Finance, American Finance Association, vol. 46(1), pages 209-37, March.
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