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Department of Economics, Stockholm University Research Papers in Economics, Department of Economics, Stockholm University

No 2009:7:
Macroeconomic Factors and Oil Futures Prices: A Data-Rich Model

Paolo Zagaglia ()

Abstract: I study the dynamics of oil futures prices in the NYMEX using a large panel dataset that includes global macroeconomic indicators, financial market indices, quantities and prices of energy products. I extract common factors from these series and estimate a Factor-Augmented Vector Autoregression for the maturity structure of oil futures prices. I find that latent factors generate information that, once combined with that of the yields, improves the forecasting performance for oil prices. Furthermore, I show that a factor correlated to purely financial developments contributes to the model performance, in addition to factors related to energy quantities and prices.

Keywords: Crude Oil; Futures Markets; Factor Models; (follow links to similar papers)

JEL-Codes: C53; D51; E52; (follow links to similar papers)

27 pages, February 10, 2009

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