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Crude oil futures trading and uncertainty

Robert Czudaj ()

No 27, Chemnitz Economic Papers from Department of Economics, Chemnitz University of Technology

Abstract: This paper examines the effect of different dimensions of uncertainty on expectations of WTI crude oil futures momentum traders at a daily level. We consider two concepts of uncertainty and two momentum trading indicators based on technical analysis. In addition, we also use wavelet techniques to decompose crude oil futures prices into different frequencies accounting for investors’ sentiment at various horizons. To allow for different effects on the propagation mechanism of uncertainty shocks, we apply a time-varying Bayesian VAR approach. Our ï¬ nd- ings indicate that both measures of uncertainty affect momentum trading on the crude oil futures market in several periods, especially during the great recession between 2007 and 2009. For the decomposed futures prices our results also show that the reaction to uncertainty differs sub- stantially across frequencies. High frequencies exhibit a very short-lived reaction to uncertainty while low frequencies show a persistent reaction to uncertainty shocks.

Keywords: Medical spending; Grossman model; Extreme Bounds Analysis; OECD panel (search for similar items in EconPapers)
JEL-codes: C12 C23 I10 I12 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2019-01, Revised 2019-01
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (3) Track citations by RSS feed

Published in Chemnitz Economic Papers, January 2019, pages 1-39

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https://www.tu-chemnitz.de/wirtschaft/vwl1/RePEc/download/tch/wpaper/CEP027.pdf First version, 2018 (application/pdf)

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