Changing Oil Price Expectations

Hawdon, David

doi:10.1007/978-1-349-11126-8_8

Cited by 1 publication

(1 citation statement)

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“…These shocks take the form of events such as sudden inventory changes, OPEC's pricing arrangements, conflicts, drilling field discoveries, or credibility of OPEC's intervention in a target zone model (Hammoudeh, 1996). They affect oil prices through oil price expectations (Hawdon, 1987(Hawdon, , 1989Rauscher, 1988;Hammoudeh and Madan, 1995) and through changes in the fundamentals (Hawdon, 1989). Focusing on the latter issue, oil market shocks can indeed alter supply and demand on different markets in the economy (Wirl, 1991); especially, a widespread literature has shown that oil price shocks affect output and inflation (Hamilton, 1983;Cunado and Perez de Garcia, 2005).…”

Section: Introductionmentioning

confidence: 99%

Modelling oil price expectations: Evidence from survey data

Prat

Uctum

2011

The Quarterly Review of Economics and Finance

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Using Consensus Forecast survey data on WTI oil price expectations for three and twelve month horizons over the period November 1989-December 2008, we find that the rational expectation hypothesis is rejected and that none of the traditional extrapolative, regressive and adaptive processes fits the data. We suggest a mixed expectation model defined as a linear combination of these traditional processes, which we interpret as the aggregation of individual mixing behavior and of heterogenous groups of agents using simple processes. This approach is consistent with the economically rational expectations theory. We show that the target price included in the regressive component of this model depends on macroeconomic fundamentals whose effects are subject to structural changes. The estimation results led to validate the mixed expectational model for the two horizons.

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