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Crude Oil Price Movements and Institutional Traders

Author

Listed:
  • Celso Brunetti

    (Federal Reserve Board, 20th and C Streets NW, Washington, DC 20551, USA)

  • Jeffrey H. Harris

    (Kogod School of Business, American University, 4400 Massachusetts Ave NW, Washington, DC 20016, USA)

  • Bahattin Büyükşahin

    (CoMeX Consulting and Advising, 4105 N Ridgeview Rd, Arlington, VA 22207, USA)

Abstract

We analyze the role of hedge fund, swap dealer, and arbitrageur activity in the crude oil market. The contribution of our work is to examine the role of institutional traders in switching between high-volatility and low-volatility regimes. Using confidential position data on institutional investors, we first analyze the linkages between trader positions and fundamentals. We find that these institutional position changes reflect fundamental economic factors. Subsequently, we adopt a Markov regime-switching model with time-varying probabilities and find that institutional position changes contribute incrementally to the probability of regime changes.

Suggested Citation

  • Celso Brunetti & Jeffrey H. Harris & Bahattin Büyükşahin, 2024. "Crude Oil Price Movements and Institutional Traders," Commodities, MDPI, vol. 3(1), pages 1-23, February.
    • Handle: RePEc:gam:jcommo:v:3:y:2024:i:1:p:6-97:d:1349099
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    References listed on IDEAS

    as
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