Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153433
Authors: 
Pagano, Patrizio
Pisani, Massimiliano
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper 999
Abstract: 
This paper documents the existence of a significant forecast error on crude oil futures. We interpret it as a risk premium, which, in part, could have been explained by means of a real-time US business cycle indicator, such as the degree of capacity utilization in manufacturing. This result is robust to the specification of the estimating equation and to the considered business cycle indicator. An out-of-the-sample prediction exercise reveals that futures adjusted to take into account this time-varying component produce significantly better forecasts than those of unadjusted futures, of futures adjusted for the average forecast error and of the random walk, particularly at horizons of more than 6 months.
Subjects: 
forecasting
Futures
Oil
JEL: 
E37
E44
G13
Q4
Document Type: 
Working Paper

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