The Predictive Characteristics of Energy Futures: Recent Evidence for Crude Oil, Natural Gas, Gasoline and Heating Oil

UCSC Economics Working Paper No. 490

16 Pages Posted: 29 Oct 2001

See all articles by Menzie David Chinn

Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics; National Bureau of Economic Research (NBER)

Michael LeBlanc

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Olivier Coibion

University of Texas at Austin

Date Written: October 2001

Abstract

This paper examines the relationship between futures and spot prices for energy commodities. In particular, we examine whether futures prices are (1) an unbiased predictor of subsequent spot prices and (2) whether futures prices are a good predictor of subsequent spot prices, in the crude oil, gasoline, heating oil markets and natural gas markets. We find that while futures prices are unbiased predictors of future spot prices in the first three markets, they are also fairly inaccurate predictors. Natural gas futures prices are both a biased predictor of subsequent spot prices at two of three horizons examined, and a poor predictor.

Keywords: futures, energy, forecasting, efficient markets hypothesis

JEL Classification: G13

Suggested Citation

Chinn, Menzie David and LeBlanc, Michael and Coibion, Olivier, The Predictive Characteristics of Energy Futures: Recent Evidence for Crude Oil, Natural Gas, Gasoline and Heating Oil (October 2001). UCSC Economics Working Paper No. 490. Available at SSRN: https://ssrn.com/abstract=288844 or http://dx.doi.org/10.2139/ssrn.288844

Menzie David Chinn (Contact Author)

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Michael LeBlanc

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

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Olivier Coibion

University of Texas at Austin ( email )

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Austin, TX 78712
United States

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