The Role of Market Expectations in Commodity Price Dynamics: Evidence from Oil Data

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Abstract

This paper examines the contribution of market expectations to commodity price dynamics. It proposes a dynamic competitive storage framework with an expectations shock explicitly along with concurrent shocks to study the commodity
price movements. This allows for a more refined analysis of the expectations' effect on price and inventory and the estimation of the expectations. Applied to the world crude oil market, it finds that the contribution of market expectations to the crude oil spot price movements is limited from 1987 to 2014.
Original languageEnglish
Place of PublicationAberdeen
PublisherUniversity of Aberdeen Business School
Pages1-47
Number of pages47
Publication statusPublished - 12 Sep 2017

Publication series

NameDiscussion Paper in Economics
PublisherUniversity of Aberdeen
No.7
Volume17
ISSN (Electronic)0143-4543

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Keywords

  • commodity spot price
  • commodity inventory
  • expectations shock
  • dynamic equilibrium model
  • state space model

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Jin, X. (2017). The Role of Market Expectations in Commodity Price Dynamics: Evidence from Oil Data. (pp. 1-47). (Discussion Paper in Economics; Vol. 17, No. 7). Aberdeen: University of Aberdeen Business School.