Financial investor sentiment and the boom/bust in oil prices during 2003–2008

Ding Du and Xiaobing Zhao ()
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Xiaobing Zhao: Northern Arizona University

Review of Quantitative Finance and Accounting, 2017, vol. 48, issue 2, No 3, 361 pages

Abstract: Abstract From both theoretical and policy perspectives, it is important to understand if financial speculation contributes to the boom/bust in oil prices during 2003–2008. In this paper, we disentangle the effects of financial speculation from those of economic fundamentals by focusing on exogenous changes of financial speculation in oil markets identified by changes in financial investor sentiment. Furthermore, we focus on a quasi-experiment setting, and investigate both sentiment-driven overvaluation of oil prices and subsequent mispricing correction. Our findings suggest that financial speculation might have contributed to the 2003–2008 boom/bust in oil prices.

Keywords: Financial investor sentiment; Financial speculation; Oil prices; Q40; G10 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s11156-016-0553-5

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