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Speculative behaviour and oil price predictability

Author

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  • Ekaterini Panopoulou

    (Kent Business School, University of Kent)

  • Theologos Pantelidis

    (Department of Economics, University of Macedonia)

Abstract

We develop two- and three-state regime switching models and test their forecasting ability for oil prices. We use the deviations of market oil price from fundamental values as the main explanatory variable in our models, while additional potential predictors enrich our specification. Our findings suggest that the regime-switching models are, in general, more accurate than the Random Walk model in terms of both statistical and economic evaluation criteria for oil price forecasts.

Suggested Citation

  • Ekaterini Panopoulou & Theologos Pantelidis, 2014. "Speculative behaviour and oil price predictability," Discussion Paper Series 2014_09, Department of Economics, University of Macedonia, revised Dec 2014.
  • Handle: RePEc:mcd:mcddps:2014_09
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    References listed on IDEAS

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    5. Chen, Yanhui & Zhang, Chuan & He, Kaijian & Zheng, Aibing, 2018. "Multi-step-ahead crude oil price forecasting using a hybrid grey wave model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 501(C), pages 98-110.

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    More about this item

    Keywords

    Oil price; Regime Switching; Forecasting; Deviations from fundamentals.;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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