Attention! Predicting crude oil prices from the perspective of extreme weather

Yongan Xu, Duy Duong and Hualong Xu

Finance Research Letters, 2023, vol. 57, issue C

Abstract: Using big data text technology, our paper constructs an Extreme Weather Attention index (EWA) to analyze its impact on crude oil prices, contributing to climate finance and behavioral finance research. Grounded in limited attention theory, EWA's influence on oil pricing is examined through investor attention. In-sample results show EWA as a significant positive predictor for long-term oil prices, with extreme weather affecting supply and demand. Out-of-sample tests reveal EWA's limited short-term prediction ability, but its accuracy in medium and long-term forecasts can yield substantial economic benefits for investors.

Keywords: Crude oil; Predicting; Attention; Extreme weather; Behavioral finance (search for similar items in EconPapers)
JEL-codes: C53 G13 Q43 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:57:y:2023:i:c:s1544612323005627

DOI: 10.1016/j.frl.2023.104190

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