Can the sentiment of the official media predict the return volatility of the Chinese crude oil futures?

Zhiwei Xu, Shiqi Gan, Xia Hua and Yujie Xiong

Energy Economics, 2024, vol. 140, issue C

Abstract: This study investigates whether the sentiment of Chinese official media towards crude oil influences price volatility of the Chinese crude oil futures (SC). By leveraging textual analysis through Bidirectional Encoder Representations from Transformers (BERT), we quantify the sentiment of oil-related articles published by the primary official media in China. Our main finding, building on both in-sample and out-of-sample analyses, robustly reveals that this sentiment significantly forecasts the one-day-ahead intraday return volatility of SC. Moreover, we extend the analysis to different time horizons (i.e., one-week and one-month-ahead) and find the prominent forecasting power of the official media sentiment as well. We also find that the official media sentiment fails to forecast the price volatility of WTI oil futures, implying that the official media sentiment contains some unique Chinese information. Overall, our study contributes to the existing literature on predicting the return volatility of the Chinese crude oil futures, and offers fresh insights into an essential yet underexplored sentiment, i.e., official media sentiment.

Keywords: Official media sentiment; Chinese crude oil futures; Intraday return volatility; In-and out-of-sample analysis; BERT (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:140:y:2024:i:c:s0140988324006753

DOI: 10.1016/j.eneco.2024.107967

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