Financial investor sentiment and the boom/bust in oil prices during 2003–2008

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

From both theoretical and policy perspectives, it is important to understand if financial speculation contributes to the boom/bust in oil prices during 2003–2008. In this paper, we disentangle the effects of financial speculation from those of economic fundamentals by focusing on exogenous changes of financial speculation in oil markets identified by changes in financial investor sentiment. Furthermore, we focus on a quasi-experiment setting, and investigate both sentiment-driven overvaluation of oil prices and subsequent mispricing correction. Our findings suggest that financial speculation might have contributed to the 2003–2008 boom/bust in oil prices.

Original languageEnglish (US)
Pages (from-to)1-31
Number of pages31
JournalReview of Quantitative Finance and Accounting
DOIs
StateAccepted/In press - Feb 26 2016

Fingerprint

Speculation
Investor sentiment
Oil prices
Economic fundamentals
Overvaluation
Quasi-experiment
Sentiment
Oil markets
Mispricing

Keywords

  • Financial investor sentiment
  • Financial speculation
  • Oil prices

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Accounting
  • Finance

Cite this

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abstract = "From both theoretical and policy perspectives, it is important to understand if financial speculation contributes to the boom/bust in oil prices during 2003–2008. In this paper, we disentangle the effects of financial speculation from those of economic fundamentals by focusing on exogenous changes of financial speculation in oil markets identified by changes in financial investor sentiment. Furthermore, we focus on a quasi-experiment setting, and investigate both sentiment-driven overvaluation of oil prices and subsequent mispricing correction. Our findings suggest that financial speculation might have contributed to the 2003–2008 boom/bust in oil prices.",
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AB - From both theoretical and policy perspectives, it is important to understand if financial speculation contributes to the boom/bust in oil prices during 2003–2008. In this paper, we disentangle the effects of financial speculation from those of economic fundamentals by focusing on exogenous changes of financial speculation in oil markets identified by changes in financial investor sentiment. Furthermore, we focus on a quasi-experiment setting, and investigate both sentiment-driven overvaluation of oil prices and subsequent mispricing correction. Our findings suggest that financial speculation might have contributed to the 2003–2008 boom/bust in oil prices.

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