Big Data Meets the Turbulent Oil Market
60 Pages Posted: 28 Dec 2020 Last revised: 22 Nov 2022
Date Written: November 21, 2022
This paper introduces novel news-based measures for tracking global energy markets. These measures compress thousands of news articles into a parsimonious set of real-time indicators and are successful in-sample forecasters of oil spot, futures, and energy company stock returns, and of changes in oil volatility, production, and inventories, complementing and extending traditional (non-text) predictors. In out-of-sample tests, text-based measures predict oil futures returns and changes in oil spot prices better than traditional predictors, although the latter are more useful for forecasting changes in oil volatility.
Keywords: Asset Pricing, Commodity Markets, Energy Forecasting, Model Validation
JEL Classification: C52, G10, G14, G17, Q47
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