Download or read book The Impact of Speculators Activity on Crude Oil Futures Prices written by Ikhlaas Gurrib and published by . This book was released on 2007 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a VECM model, findings indicate significant short-run causality running from speculators' trading activity to futures prices. However, the magnitude of this effect was small. Long-run causality, on the other hand, runs from prices to speculators' activity and not vice versa, whenever spot prices, futures prices and speculators' net positions are cointegrated. Using conditional standard deviation as a proxy to volatility, findings support no significant relationship between large speculators trading activity and volatility in the U.S. Crude Oil futures market. Using conditional variance, however, supported a significant negative relationship between trading activity and volatility. Recursive estimates of standard deviation were more volatile than its variance counterpart, due to the higher sensitivity of standard deviation to futures prices.
Download or read book Oil Price Volatility and the Role of Speculation written by Samya Beidas-Strom and published by International Monetary Fund. This book was released on 2014-12-12 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: How much does speculation contribute to oil price volatility? We revisit this contentious question by estimating a sign-restricted structural vector autoregression (SVAR). First, using a simple storage model, we show that revisions to expectations regarding oil market fundamentals and the effect of mispricing in oil derivative markets can be observationally equivalent in a SVAR model of the world oil market à la Kilian and Murphy (2013), since both imply a positive co-movement of oil prices and inventories. Second, we impose additional restrictions on the set of admissible models embodying the assumption that the impact from noise trading shocks in oil derivative markets is temporary. Our additional restrictions effectively put a bound on the contribution of speculation to short-term oil price volatility (lying between 3 and 22 percent). This estimated short-run impact is smaller than that of flow demand shocks but possibly larger than that of flow supply shocks.
Download or read book Fundamentals Speculation and the Pricing of Crude Oil Futures written by Thomas Hoehl and published by GRIN Verlag. This book was released on 2011-11 with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2011 in the subject Economics - Finance, grade: 8,0, Maastricht University (School of Business and Economics), language: English, abstract: This study finds that while a large part of the variation in crude oil futures prices is driven by fundamental factors, financial investment and speculation has the potential to aggravate reactions to changing fundamental variables and furthermore move prices on its own. The evidence is gathered by performing linear regressions and Granger Causality tests on futures returns, position data of different categories of futures traders on the New York Mercantile Exchange and proxies for relevant fundamental factors such as equity and exchange rate returns gathered from August 2006 to December 2010. While higher prices for crude oil naturally come along with increasing physical demand and finite world supply, future regulation might temper market volatility and guarantee that prices reflect a sustainable physical market equilibrium. The study also gives an overview of commodity market regulation and position limits on futures markets.
Download or read book The Role of Market Speculation in Rising Oil and Gas Prices written by and published by . This book was released on 2006 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Speculation and Volatility in the Crude Oil Futures Market written by Yun Pan and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Role of Financial Speculation in the World Crude Oil Market written by Yan Hu and published by . This book was released on 2017 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: When the crude oil price rocketed to $147 per barrel in July 2008 and then dropped to as low as $30 per barrel in December 2008, it catalyzed a hot debate about the factors of oil price fluctuations. A large number of papers argue that the main driver of the oil price fluctuations from 2003 to 2008 was due to economic fundamentals in the form of rapidly growing oil demand with stagnant oil supply. However, a different view is that speculation in the oil futures market caused the oil price to drift away from the level justified by the fundamental market forces of demand and supply because a large amount of investment flowed to the oil futures market during this period. This dissertation links the oil financial and spot markets through the oil futures-spot price spread and investigates if the financial activity in the oil futures market plays a critical role in oil spot price fluctuations between 2003 and 2008. In addition, this dissertation also discusses the recent oil price drop since July 2014 and studies whether the main driver of this recent oil price change is similar to that of the oil price change in 2008. ☐ Unlike other related literature that uses standard structural VAR, this dissertation applies a Time Varying Parameter Vector Autoregression (TVP-VAR) model with stochastic volatilities that can capture both time-varying relationships between economic aggregates and time-varying impacts of different oil shocks. This approach disentangles the oil financial speculation shock from economic fundamental shocks. In the meantime, the findings of the TVP-VAR model are compared with those of the Bayesian VAR with stochastic volatilities (BVAR-SV) model, a benchmark model in this dissertation, to see if incorporating time-varying coefficients in the model can give better results. The results of the comparison show that the time variations in coefficients are insignificant and imposing time varying coefficients in the model not only increases the estimation computation work load but also affects the model’s estimation accuracy. Therefore, the conclusion in this dissertation comes from the results of the BVAR-SV model. The results imply that the large proportion of the oil price changes from 2003 to 2008 can be explained by the oil demand shock but this proportion has been decreasing since 2005. In addition, the contribution of the oil financial speculation shock has increased substantially in recent years. In sum, the main driver of oil price change is oil demand from 2003 to 2008, whereas the main driver from 2014 to 2015 is oil financial speculation in the oil futures market.
Download or read book The Case for Speculation in the U S Crude Oil Market written by Mary Grace Flannery and published by . This book was released on 2010 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volatile oil prices in the United States in recent years have led to a focus on speculation in the crude oil markets. Some legislators and the public place the blame for high oil prices on speculators and aim to impose greater regulation on this category of traders. However, do speculators influence price in the crude oil market, or can fundamental factors sufficiently explain the price of crude oil? This thesis examines the pros and cons of speculative activity in the U.S. crude oil market, conducts a quantitative analysis to determine the relationship between speculative activity and crude oil prices, discusses proposed legislation, and endorses selected legislation for greater disclosure of OTC derivatives.
Download or read book Price Dynamics and Speculators in Crude Oil Future Marke written by Hui Bu and published by . This book was released on 2016 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the behavior of crude oil futures price and volatility, analyzes the relationship between speculative traders' positions and returns, and investigates whether speculative traders' position changes have a significant effect on crude oil price. It also studies how speculation factor influence crude oil returns and volatility, whether returns are related to risks, and whether financial crises increase volatility in crude oil futures markets. The empirical results from Granger causality reveal that return lead speculative position, which indicates that non-commercial or managed money traders are a class of positive feedback traders or trend followers; and also reveal that the position changes held by speculative traders will cause crude oil price movement. Based on the estimation results of GARCH(1,1) model we verify position changes of non-commercial or managed money traders can impact crude oil futures returns significantly, and indicate returns are not related to conditional variance. Moreover, during the financial crisis, crude oil futures return shows an extreme large volatility. These findings can help us better understand price discovery process in crude oil futures market, and is useful in risk management and financial engineering.
Download or read book Do Speculators Drive Crude Oil Prices written by Jochen Möbert and published by . This book was released on 2009 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article discusses the influence of speculators in the futures market on crude oil prices. The results suggest the dispersion in beliefs influences both crude oil prices and price volatility. -- Crude oil market ; futures market ; speculation
Download or read book Crude Oil Pricing written by Michael Hall Yan and published by . This book was released on 2012 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is intended to better understand the effects of speculation on crude oil prices. While speculation has many benefits such as increasing market liquidity and bearing market risks that other wish to offset, speculation can also create unwanted market volatility and economic bubbles. During the past decade, crude oil prices have been extremely volatile causing increased controversy between investors and regulators regarding the role that oil speculation has played in the price of crude oil. This report examines the relationship between crude oil spot and futures prices to determine the role arbitragers, speculators, and hedgers have had in crude oil pricing.
Download or read book Are Speculators Destabilizing Commodity Markets written by Raffael Waldmeier and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This master thesis analyses the impact of speculation on the stability of the commodity futures market. The study differentiates between three types of speculation, namely index speculation, non-commercial speculation and excess speculation. In a Vector AutoRegression (VAR) framework I use Granger causality analyses and impulse response functions (IRF) in order to analyse, whether speculation activities have a significant impact on the commodity futures price volatility or not. In particular, the scope of the analysis includes two energy commodities, crude oil and natural gas, an agricultural commodity, corn, and two metals, copper and gold. Applying a relatively new dataset for index investment trading, it shows that index investment had not significantly affected price volatility in the commodity market between 2007 and 2015. In exchange, the results suggest that index speculation rather reduced volatility than the other way around. The same is true for non-commercial or traditional speculation, which neither has destabilized commodity markets during the analysed period between 1993 and 2016. Moreover, the sample is split into two sub-periods in order to analyse possible changes in the dynamics of the commodity markets due to the financialization. Finally, contrasting the findings of the other analyses, it shows that excess speculation had indeed caused an increase in commodity futures prices. The findings suggest that excess speculation had a significant detrimental effect on the stability of the crude oil market. The diversity in the findings emphasizes the importance of distinguishing between the different types of speculation. Altogether, it shows that speculation does, in general, not increase futures price volatility.
Download or read book The Impact of Excessive Speculation on Crude Oil Futures Prices written by Deboh N'Diaye and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this thesis is to empirically investigate the impact of excessive speculation on WTI futures prices from January 2003 to December 2012. The paper asks two questions: whether excessive speculation (as proxied by Working's T index) has had an explanatory role over the period and whether that role was significant. A Vector Error Correction Model is applied to examine the dynamic relationships between WTI futures prices and several explanatory variables. Two models are estimated and compared: one that includes common fundamental and financial variables and one that additionally includes the same variables plus the excessive speculation variable. Following the minimization of the Akaike Information Criterion and the Schwartz Information Criterion, the model that includes the excessive speculation variable is favoured. Moreover the proxy for excessive speculation is found to be a significant explanatory variable of WTI prices at the 5% level.
Download or read book Speculation by Commodity Index Funds written by Scott H. Irwin and published by CABI. This book was released on 2023-04-25 with total page 279 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commodity futures prices exploded in 2007-2008 and concerns about a new type of speculative participant in commodity futures markets began to emerge. The main argument was that unprecedented buying pressure from new "commodity index" investors created massive bubbles that resulted in prices substantially exceeding fundamental value. At the time, it was not uncommon to link concerns about speculation and high prices to world hunger, food crises, and civil unrest. Naturally, this outcry resulted in numerous regulatory proposals to restrict speculation in commodity futures markets. This book presents important research on the impact of index investment on commodity futures prices that the authors conducted over the last fifteen years. The eleven articles presented in the book follow the timeline of our involvement in the world-wide debate about index funds as it evolved after 2007. We also include an introductory chapter, new author forewords for each article chapter, and a lessons learned chapter to round out the book. Policy-makers, researchers, and market participants will find the book not only functions as useful documentation of the debate; but, also as a natural starting point when high commodity prices inevitably create the next speculation backlash.
Download or read book Speculation and Return Volatility written by Rui Wang and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Speculation in the Crude Oil Market written by United States. Congress. Senate. Committee on Homeland Security and Governmental Affairs. Permanent Subcommittee on Investigations and published by . This book was released on 2008 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A New Approach to Measure Speculation in the Oil Futures Market and Some Policy Implications written by Leo H. Chan and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose using a new relative measure, the speculative ratio, defined as trading volume divided by open interest, to gauge speculative activity in the oil futures market. We apply the speculative ratio to examine the relation between basis and speculative activity in the oil futures market before and after the financialization of the oil market in 2003. Our finding suggests that the oil futures market is dominated by uninformed speculators in the post-financialization period. Our finding carries several practical policy implications, as follows: (1) both the commodity exchange and the regulator should design regulations and trading policies that improve basis risk; (2) on the commodity exchange side, new policies on margin requirements and position limits for speculators should be implemented; (3) margin requirements should be based on the level of basis risk; (4) regulators should speed up implementation of the position limit rule in the Dodd-Frank Act; and (5) stronger and more meaningful enforcement actions by regulators are required to punish and deter market manipulators.
Download or read book Forecasting Accuracy of Crude Oil Futures Prices written by Mr.Manmohan S. Kumar and published by International Monetary Fund. This book was released on 1991-10-01 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper undertakes an investigation into the efficiency of the crude oil futures market and the forecasting accuracy of futures prices. Efficiency of the market is analysed in terms of the expected excess returns to speculation in the futures market. Accuracy of futures prices is compared with that of forecasts using alternative techniques, including time series and econometric models, as well as judgemental forecasts. The paper also explores the predictive power of futures prices by comparing the forecasting accuracy of end-of-month prices with weekly and monthly averages, using a variety of different weighting schemes. Finally, the paper investigates whether the forecasts from using futures prices can be improved by incorporating information from other forecasting techniques.
