News media and attention spillover across energy markets: a powerful predictor of crude oil futures prices

Date
2022
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
Energy Journal
Print ISSN
Electronic ISSN
0195-6574
Publisher
International Association for Energy Economics
Volume
43
Issue
Pages
5 - 25
Language
English
Type
Article
Journal Title
Journal ISSN
Volume Title
Series
Abstract

We develop two news-based investor attention measures from the news trends function of the Bloomberg terminal and investigate their predictive power for returns on crude oil futures contracts with various maturities. Our main results after controlling for relevant macroeconomic variables show that the Oil-based Institutional Attention Index is useful in predicting oil futures returns, especially during price downturn periods, while the forecasting accuracy is further improved when the Commodity Market Institutional Attention Index is used. This forecasting accuracy decreases, however, with the maturity of oil futures contracts. Moreover, we find some evidence of Granger-causality and regime-dependent interactions between investor attention measures and oil futures returns. Finally, variable selection algorithms matter before making predictions since they create the best forecasting results in many cases considered. These findings are important for in-formed traders and policymakers to better understand the price dynamics of the oil markets. © 2022 by the IAEE. All rights reserved.

Course
Other identifiers
Book Title
Keywords
Crude oil returns, Density forecasting, Investor attention, Time-varying Granger causality, Variable selection
Citation
Published Version (Please cite this version)