Tracking spot oil: The elusive quest

Ludwig Chincarini

Journal of Commodity Markets, 2020, vol. 17, issue C

Abstract: It has been well documented that oil investing vehicles do a poor job of tracking spot oil over long periods. We create optimized investment vehicles that attempt to use backward- and forward-looking indicators in the oil market in order to better track spot oil. Nevertheless, we find that it is extremely difficult to track spot oil using a combination of oil futures, oil stocks, and oil ETFs. However, some contango drag from investing in oil futures can be eliminated, although at the cost of a higher tracking error, by using a forward-looking dynamic strategy that invests in both oil futures and oil stocks.

Keywords: Oil investing; Futures investing; Tracking error; Commodities; Exchange-traded funds (search for similar items in EconPapers)
JEL-codes: G0 G11 G14 G4 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:17:y:2020:i:c:s2405851318300825

DOI: 10.1016/j.jcomm.2019.04.003

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