We develop a structural VAR global oil market model that replaces a proxy of crude oil inventories with the oil-futures spread. The latter is defined as the percent deviation of the oil futures price from their spot price of crude oil. This model implies an appropriate identication strategy that combined with the financial forward looking variable allows to identify speculation activities from financial market. We compare this model with others proposed in the current literature providing a rank of them based on a qualitative assessment of their impulse responses function. We find out that the structural VAR model with oil futures spread performs better than all models investigated in this analysis. Finally, we find evidence that financial speculation played an important role to explain the path of oil prices, during the financialization process of the crude oil markets.

Modelling the price of crude oil: is there any role for financial speculation? / D. Valenti. - [s.l] : Dipartimento di Economia, Management e Metodi Quantitativi dell’ Università di Milano (DEMM), 2016 Feb 24.

Modelling the price of crude oil: is there any role for financial speculation?

D. Valenti
2016

Abstract

We develop a structural VAR global oil market model that replaces a proxy of crude oil inventories with the oil-futures spread. The latter is defined as the percent deviation of the oil futures price from their spot price of crude oil. This model implies an appropriate identication strategy that combined with the financial forward looking variable allows to identify speculation activities from financial market. We compare this model with others proposed in the current literature providing a rank of them based on a qualitative assessment of their impulse responses function. We find out that the structural VAR model with oil futures spread performs better than all models investigated in this analysis. Finally, we find evidence that financial speculation played an important role to explain the path of oil prices, during the financialization process of the crude oil markets.
Modelling oil prices; Structural VAR models for global oil market; Financial speculation
Settore SECS-P/05 - Econometria
Settore SECS-P/01 - Economia Politica
Working Paper
Modelling the price of crude oil: is there any role for financial speculation? / D. Valenti. - [s.l] : Dipartimento di Economia, Management e Metodi Quantitativi dell’ Università di Milano (DEMM), 2016 Feb 24.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/477942
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