Do Financial Investors Destabilize the Oil Price?
By Marco J. Lombardi, Ine Van Robays. Social Science Research Network, 2011
118 citations recorded by the source corpus.
We assess whether and to what extent ?nancial activity in the oil futures markets has contributed to destabilize oil prices in recent years. We de?ne a destabilizing ?nancial shock as a shift in oil prices that is not related to current and expected fun- damentals, and thereby distorts e¢ cient pricing in the oil market. Using a structural VAR model identi?ed with sign restrictions, we disentangle this non-fundamental ?- nancial shock from fundamental shocks to oil supply and demand to determine their relative importance. We ?nd that shocks to oil demand and supply remain the main drivers of oil price swings. Financial investors in the futures market can however destabilize oil spot prices, although only in the short run. Moreover, ?nancial ac- tivity appears to have exacerbated gyrations in the oil market over the past decade, particularly in 2007-2009.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/e980571e1f45cb13ffab7b20652df2e3e1ef1c73
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In Economics and Econometrics
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Citations in the corpus
- Oil, Gold, US dollar and Stock market interdependencies: A global analytical insight (2017, background): “price since 2003, as emerging economy commodity demand growth pushed oil price upwards (Kilian, 2009; Lombardi and Robays, 2011).”
- The Role of Speculation in Oil Markets: What Have We Learned So Far? (2013, unknown): “In related work, Lombardi and Van Robays (2011) propose to augment the Kilian and Murphy model with data on the oil futures price.”
- Financialization and Structural Change in Commodity Futures Markets (2012, background): “…2009; Phillips and Yu, 2010) or investigate the general impact of speculation in the recent commodity price movements without directly testing for statistical linkages between index fund positions and price movements (Kilian and Murphy, 2010; Lombardi and Robays, 2011; Juvenal and Petrella, 2011).”