Can the Dynamics of the Term Structure of Petroleum Futures be Forecasted? Evidence from Major Markets

Chantziara, T., and Skiadopoulos, G. (2008): ¿Can the Dynamics of the Term Structure of Petroleum Futures be forecasted? Evidence from Major Markets¿, Energy Economics, 30:3, pp. 962-985.

Energy Economics, Vol. 30, No. 3, 2008

Posted: 29 Apr 2008 Last revised: 24 Oct 2008

See all articles by Thalia Chantziara

Thalia Chantziara

New York University

George S. Skiadopoulos

University of Piraeus, Department of Banking and Financial Management; Queen Mary, University of London, School of Economics and Finance

Abstract

We investigate whether the daily evolution of the term structure of petroleum futures can be forecasted. To this end, the principal components analysis is employed. The retained principal components describe the dynamics of the term structure of futures prices parsimoniously and are used to forecast the subsequent daily changes of futures prices. Data on the New York Mercantile Exchange (NYMEX) crude oil, heating oil, gasoline, and the International Petroleum Exchange (IPE) crude oil futures are used. We find that the retained principal components have small forecasting power both in-sample and out-of-sample. Similar results are obtained from standard univariate and vector autoregression models. Spillover effects between the four petroleum futures markets are also detected.

Keywords: Petroleum futures, Principal components analysis, Predictability, Spillovers, Term structure of futures prices

JEL Classification: C53, G10, G13, G14, Q49

Suggested Citation

Chantziara, Thalia and Skiadopoulos, George and Skiadopoulos, George, Can the Dynamics of the Term Structure of Petroleum Futures be Forecasted? Evidence from Major Markets. Chantziara, T., and Skiadopoulos, G. (2008): ¿Can the Dynamics of the Term Structure of Petroleum Futures be forecasted? Evidence from Major Markets¿, Energy Economics, 30:3, pp. 962-985., Energy Economics, Vol. 30, No. 3, 2008, Available at SSRN: https://ssrn.com/abstract=1125623

Thalia Chantziara

New York University ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

George Skiadopoulos (Contact Author)

University of Piraeus, Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

HOME PAGE: http://https://sites.google.com/view/george-skiadopoulos

Queen Mary, University of London, School of Economics and Finance

Lincoln's Inn Fields
Mile End Rd.
London, E1 4NS
United Kingdom

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