Are petroleum futures prices good predictors of cash value?

Bopp, Anthony E.; Sitzer, Scott

doi:10.1002/fut.3990070609

Cited by 65 publications

(30 citation statements)

References 4 publications

(3 reference statements)

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“…Bopp and Sitzer (1987) find that futures prices have a significant positive contribution to past price changes, even when crude oil prices, inventory levels, weather, and other important variables are accounted for. Serletis and Banack (1990) use daily data for spot, two-month futures crude oil prices, and prices of gasoline and heating oil traded on the New York Mercantile Exchange (NYMEX), to test market efficiency, and find evidence in support of the market efficiency hypothesis.…”

Section: Introductionmentioning

confidence: 83%

Market efficiency of oil spot and futures: A mean-variance and stochastic dominance approach

2010

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This paper examines the market efficiency of oil spot and futures prices by using both mean-variance (MV) and stochastic dominance (SD) approaches. Based on the West Texas Intermediate crude oil data for the sample period 1989-2008, we find no evidence of any MV and SD relationships between oil spot and futures indices. This infers that there is no arbitrage opportunity between these two markets, spot and futures do not dominate one another, investors are indifferent to investing in spot or futures, and the spot and futures oil markets are efficient and rational. The empirical findings are robust to each sub-period before and after the crises for different crises, and also to portfolio diversification.

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Section: Introductionmentioning

confidence: 83%

Market efficiency of oil spot and futures: A mean-variance and stochastic dominance approach

2010

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“…The hypothesis that heating oil futures prices are good predictors of spot prices was tested by Bopp and Sitzer (1987), who found that, even when crude oil prices, inventory levels, weather, and other important variables were accounted for, futures prices still made a significant positive contribution to describing past price changes. Serletis and Banack (1990) used daily data for the spot and two-month futures crude oil prices, and for prices of gasoline and heating oil traded on the New York Stock Exchange (NYMEX), to test for market efficiency, and found evidence that was consistent with this hypothesis.…”

Section: Market Efficiency Literaturementioning

confidence: 99%

Modeling dynamic conditional correlations in WTI oil forward and futures returns

Lanza

Manera

McAleer

2006

Finance Research Letters

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“…That is, today's price contains information about people's expectations about the future. The hypothesis that heating oil futures prices are good predictors of spot prices was tested by Bopp and Sitzer (1987), who found that, even when crude oil prices, inventory levels, weather, and other important variables were accounted for, futures prices still made a significant positive contribution to describing past price changes. Serletis and Banack (1990) used daily data for the spot and two-month futures crude oil prices, and for prices of gasoline and heating oil traded on the New York Stock Exchange (NYMEX), to test for market efficiency, and found evidence that was consistent with this hypothesis.…”

Section: Market Efficiency Literaturementioning

confidence: 99%

Modelling Dynamic Conditional Correlations in WTI Oil Forward and Futures Returns

2004

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Modelling Dynamic Conditional Correlations in WTI Oil Forward and Futures Returns SummaryThis paper estimates the dynamic conditional correlations in the returns on WTI oil onemonth forward prices, and one-, three-, six-, and twelve-month futures prices, using recently developed multivariate conditional volatility models. The dynamic correlations enable a determination of whether the forward and various futures returns are substitutes or complements, which are crucial for deciding whether or not to hedge against unforeseen circumstances. The models are estimated using daily data on WTI oil forward and futures prices, and their associated returns, from 3 January 1985 to 16 January 2004. At the univariate level, the estimates are statistically significant, with the occasional asymmetric effect in which negative shocks have a greater impact on volatility than positive shocks. In all cases, both the short-and long-run persistence of shocks are statistically significant. Among the five returns, there are ten conditional correlations, with the highest estimate of constant conditional correlation being 0.975 between the volatilities of the three-month and six-month futures returns, and the lowest being 0.656 between the volatilities of the forward and twelve-month futures returns. The dynamic conditional correlations can vary dramatically, being negative in four of ten cases and being close to zero in another five cases. Only in the case of the dynamic volatilities of the three-month and six-month futures returns is the range of variation relatively narrow, namely (0.832, 0.996). Thus, in general, the dynamic volatilities in the returns in the WTI oil forward and future prices can be either independent or interdependent over time.

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Are petroleum futures prices good predictors of cash value?

Cited by 65 publications

References 4 publications

Market efficiency of oil spot and futures: A mean-variance and stochastic dominance approach

Market efficiency of oil spot and futures: A mean-variance and stochastic dominance approach

Modeling dynamic conditional correlations in WTI oil forward and futures returns

Modelling Dynamic Conditional Correlations in WTI Oil Forward and Futures Returns

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