Research Discussion Papers, Bank of Finland
No 2/2011:
What explains risk premia in crude oil futures?
Marko Melolinna ()
Abstract: This paper studies the existence of risk premia in crude
oil futures prices with simple regression and Bayesian VAR models. It also
studies the importance of three main risk premia models in explaining and
forecasting the risk premia in practice. Whilst the existence of the premia
and the validity of the models can be established at certain time points,
it turns out that the choice of sample period has a considerable effect on
he results. Hence, the risk premia are highly timevarying. The study also
establishes a model, based on speculative positions in the futures markets,
which has some predictive power for future oil spot prices.
Keywords: forecasting; oil futures; risk premia; Bayesian VAR models; (follow links to similar papers)
JEL-Codes: C01; C32; C53; (follow links to similar papers)
40 pages, February 17, 2011
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