Intraday Return Predictability in the Crude Oil Market: The Role of EIA Inventory Announcements

43 Pages Posted: 9 Apr 2021

See all articles by Ivan Indriawan

Ivan Indriawan

Auckland University of Technology - Department of Finance

Donald D. Lien

University of Texas at San Antonio - College of Business - Department of Economics

Zhuzhu Wen

PBCSF, Tsinghua University

Yahua Xu

Central University of Finance and Economics (CUFE) - China Economics and Management Academy

Date Written: April 8, 2021

Abstract

We study the impact of the announcements released by the US Energy Information Administration (EIA) crude oil storage every Wednesday at 10:30 ET (the beginning of the third half-hour interval) on intraday return predictability, that is, intraday momentum. Our results indicate that returns on both the first half-hour and third half-hour on EIA announcement days can significantly and positively predict the returns in the last half-hour, whereas, on non-EIA announcement days, only returns in the first half-hour have significant predictability. The dominant source of prediction in the first half-hour return also differs between EIA announcement and non-announcement groups, the market open and overnight component, respectively. EIA announcements contribute to intraday momentum because they attract more informed traders and because the period surrounding their release is often associated with a reduction in liquidity. Substantial economic gains can be made by using efficient intraday predictors as trading signals.

Keywords: Crude oil market, EIA announcements, Intraday momentum, Return predictability

JEL Classification: G14; G17; Q40

Suggested Citation

Indriawan, Ivan and Lien, Donald and Wen, Zhuzhu and Xu, Yahua, Intraday Return Predictability in the Crude Oil Market: The Role of EIA Inventory Announcements (April 8, 2021). Available at SSRN: https://ssrn.com/abstract=3822093 or http://dx.doi.org/10.2139/ssrn.3822093

Ivan Indriawan

Auckland University of Technology - Department of Finance ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

Donald Lien

University of Texas at San Antonio - College of Business - Department of Economics ( email )

6900 North Loop 1604 West
San Antonio, TX 78249
United States
210-458-4313 (Phone)
210-458-4308 (Fax)

Zhuzhu Wen (Contact Author)

PBCSF, Tsinghua University ( email )

Yahua Xu

Central University of Finance and Economics (CUFE) - China Economics and Management Academy ( email )

NO.39 South College Road
Haidian District
Beijing, 100081
China

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