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Does disagreement among oil price forecasters reflect future volatility? Evidence from the ECB Surveys

Tarek Atallah, Fred Joutz () and Axel Pierru ()
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Tarek Atallah: King Abdullah Petroleum Studies and Research Center (KAPSARC)

No 2013-001, Working Papers from The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting

Abstract: For short forecast horizons, we find statistical evidence that the oil price volatility observed ex post explains ex-ante disagreement between oil price forecasters of the ECB’s professional survey. Since the forecasts considered are quarterly average prices, the observed disagreement is however not directly comparable to oil price volatility. We therefore use the geometric Brownian motion as a benchmark model to translate the observed disagreement into volatility. When applied to the ECB surveys, this method results in a disagreement-based volatility that is well correlated with the volatility observed ex post. These empirical findings are robust to the number of respondents considered.

Pages: 19 pages
Date: 2013-04
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