Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/141896
Authors: 
Choi, Hankyeung
Leatham, David J.
Sukcharoen, Kunlapath
Year of Publication: 
2015
Citation: 
[Journal:] Contemporary Economics [ISSN:] 2084-0845 [Publisher:] Vizja Press & IT [Place:] Warsaw [Volume:] 9 [Year:] 2015 [Issue:] 1 [Pages:] 29-44
Abstract: 
Given the emerging consensus from previous studies that crude oil and refined product (as well as crack spread) prices are cointegrated, this study examines the link between the crude oil spot and crack spread derivatives markets. Specifically, the usefulness of the two crack spread derivatives products (namely, crack spread futures and the ETF crack spread) for modeling and forecasting daily OPEC crude oil spot prices is evaluated. Based on the results of a structural break test, the sample is divided into pre-crisis, crisis, and post-crisis periods. We find a unidirectional relationship from the two crack spread derivatives markets to the crude oil spot market during the post-crisis period. In terms of forecasting performance, the forecasting models based on crack spread futures and the ETF crack spread outperform the Random Walk Model (RWM), both in-sample and out-of-sample. In addition, on average, the results suggest that information from the ETF crack spread market contributes more to the forecasting models than information from the crack spread futures market.
Subjects: 
oil price forecasting
crack spread futures
oil-related exchange traded funds
multivariate GARCH model
JEL: 
C18
C58
G17
Q47
Persistent Identifier of the first edition: 
Document Type: 
Article
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