 Modelling oil price expectations: Evidence from survey dataThe Quarterly Review of Economics and Finance, 2011, vol. 51, issue 3, 236-247 Abstract: Using Consensus Forecast survey data on WTI oil price expectations for 3- and 12-month horizons over the period November 1989 to December 2008, we find that the rational expectation hypothesis is rejected and that none of the traditional extrapolative, regressive and adaptive processes fits the data by itself. We suggest a mixed expectation model defined as a linear combination of these traditional processes, which we interpret as the aggregation of individual mixing behavior and of heterogenous groups of agents using these simple processes. This approach is consistent with the economically rational expectations theory. We show that the target oil price included in the regressive component of this model depends on the long-run marginal cost of crude oil production and on short term macroeconomic fundamentals whose effects are subject to structural changes. For the two horizons, estimation results provide evidence for our mixed expectation model incorporating this break-dependent target price. Keywords: Expectations; formation; Oil; price (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:51:y:2011:i:3:p:236-247 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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