Smooth transition regime shifts and oil price dynamics

Cifarelli, Giulio

doi:10.1016/j.eneco.2013.03.006

Cited by 5 publications

(9 citation statements)

References 22 publications

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“…Feedback trading has been found to be present across a broad spectrum of commodities, with most evidence of its presence emanating from the energy market. Research has indicated that feedback traders are active in the crude oil spot and futures markets (Cifarelli andPaladino, 2010, 2012;Bu, 2011;Wu et al, 2012;Cifarelli, 2013); their significance is time-varying (Cifarelli andPaladino, 2010, 2012;Wu et al, 2012) and can be identified with specific tradertypes, such as non-commercial and managed money traders (Bu, 2011), commercial hedgers (Tokic, 2012) and oil producers/consumers (Cifarelli, 2013). , on the other hand, document no evidence of feedback trading in the crude oil market, with their results supporting the presence of feedback traders in other energy markets (coal [100]; electricity) [101].…”

Section: Commoditiesmentioning

confidence: 99%

Feedback trading: a review of theory and empirical evidence

Economou

Gavriilidis

Gębka

et al. 2022

RBF

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PurposeThe purpose of this paper is to comprehensively review a large and heterogeneous body of academic literature on investors' feedback trading, one of the most popular trading patterns observed historically in financial markets. Specifically, the authors aim to synthesize the diverse theoretical approaches to feedback trading in order to provide a detailed discussion of its various determinants, and to systematically review the empirical literature across various asset classes to gauge whether their feedback trading entails discernible patterns and the determinants that motivate them.Design/methodology/approachGiven the high degree of heterogeneity of both theoretical and empirical approaches, the authors adopt a semi-systematic type of approach to review the feedback trading literature, inspired by the RAMESES protocol for meta-narrative reviews. The final sample consists of 243 papers covering diverse asset classes, investor types and geographies.FindingsThe authors find feedback trading to be very widely observed over time and across markets internationally. Institutional investors engage in feedback trading in a herd-like manner, and most noticeably in small domestic stocks and emerging markets. Regulatory changes and financial crises affect the intensity of their feedback trades. Retail investors are mostly contrarian and underperform their institutional counterparts, while the latter's trades can be often motivated by market sentiment.Originality/valueThe authors provide a detailed overview of various possible theoretical determinants, both behavioural and non-behavioural, of feedback trading, as well as a comprehensive overview and synthesis of the empirical literature. The authors also propose a series of possible directions for future research.

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Section: Commoditiesmentioning

confidence: 99%

Feedback trading: a review of theory and empirical evidence

Economou

Gavriilidis

Gębka

et al. 2022

RBF

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“…Several econometric analyzes are carried out with the pur-pose of evaluating the relationship between the net long positions 8 held by non-commercial operators (speculators) and oil futures prices.…”

Section: On the Effects Of Speculation On Oil Pricesmentioning

confidence: 99%

“…More sophisticated econometric techniques (e.g. Generalized AutoRegressive Conditional Heteroskedasticity -GARCH -models) are employed by, among others, Du et al [10], Cifarelli [8], Manera et al [24]. lead to speculative activity that may drift prices away from "fundamental" values.…”

Section: On the Effects Of Speculation On Oil Pricesmentioning

confidence: 99%

“…Other studies (for instance, Du et al [10], Cifarelli [8] and Manera et al [24]) address the determinants of oil price volatility.…”

Section: On the Effects Of Speculation On Oil Pricesmentioning

confidence: 99%

“…Cifarelli [8] By using multivariate GARCH models, Manera et al [24] document that financial speculation, measured by the Working's T index (Working [37]), does not affect significantly commodity returns. They also find that evidence of a negative correlation between agriculture and energy commodities.…”

Section: On the Effects Of Speculation On Oil Pricesmentioning

confidence: 99%

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Big Fish: Oil Markets and Speculation

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The role of speculators in the oil markets has been vastly investigated during the last few years. Several authors focused on the definition of speculation while others examined the relationship between oil prices and the behavior of trading actors. In this paper, we formulate a new theory able to describe "hedging needs" as well as the role of speculators in the crude oil market. According to our model, the different strategies of producers and consumers aimed at defending themselves against abrupt oil price changes can be satisfied only if speculators play a very active role. Due to the rapid growth in shale oil production, the importance of speculation in ensuring an equilibrium in the U.S. crude oil market has consequently grown noticeably. We estimate an econometric conditional Error Correction Model (ECM) applying Pesaran's bound tests, over the sample February 2000 November 2014, using WTI and CFTC data. Our theory is well supported by econometric evidence. In other words, our model is suitable to demonstrate how commercial operators act on the market. In addition, the increasing importance of future contracts (also known as financialisation of crude oil market) helps in reaching a level of prices close to the equilibrium one. Finally, we are able to find evidence of a positive impact of the action of speculators on the efficiency of oil markets as they help stabilizing prices.

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Investor Structure and Corn Futures Price Volatility in China: Evidence Based on the Agent-Based Model

Zhao,

2024

Comput Econ

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Smooth transition regime shifts and oil price dynamics

Cited by 5 publications

References 22 publications

Feedback trading: a review of theory and empirical evidence

Feedback trading: a review of theory and empirical evidence

Big Fish: Oil Markets and Speculation

Investor Structure and Corn Futures Price Volatility in China: Evidence Based on the Agent-Based Model

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