Forecasting Oil Price Movements: Exploiting the Information in the Future Market
Andrea Coppola
CEIS Research Paper from Tor Vergata University, CEIS
Abstract:
Relying on the cost of carry model, we investigate the long-run relationship between spot and futures prices and use the information implied in these cointegrating relationships to forecast out of sample oil spot and futures price movements. In order to forecast oil price movements, we employ a Vector Error Correction Model (VECM), where the deviations from the long-run relationships between spot and futures prices constitute the equilibrium error. In order to evaluate forecasting performance we use the Random Walk Model (RWM) as a benchmark. We .nd that: (i) in-sample, the information in the futures market can explain a sizeable portion of oil price movements; (ii) out-of-sample, the VECM is able to beat the random walk model, both in terms of point forecasting and in terms of market timing ability
Keywords: crude oil; futures market; forecasting. (search for similar items in EconPapers)
JEL-codes: G1 Q3 Q4 (search for similar items in EconPapers)
Pages: 29
Date: 2007-03-05
New Economics Papers: this item is included in nep-ene and nep-for
References: Add references at CitEc
Citations: View citations in EconPapers (6)
Downloads: (external link)
https://ceistorvergata.it/RePEc/rpaper/No-100.pdf (application/pdf)
Related works:
Journal Article: Forecasting oil price movements: Exploiting the information in the futures market (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:rtv:ceisrp:100
Ordering information: This working paper can be ordered from
CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
https://ceistorvergata.it
Access Statistics for this paper
More papers in CEIS Research Paper from Tor Vergata University, CEIS CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma. Contact information at EDIRC.
Bibliographic data for series maintained by Barbara Piazzi ().