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Crude oil: Does the futures price predict the spot price?

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  • Chu, Pyung Kun
  • Hoff, Kristian
  • Molnár, Peter
  • Olsvik, Magnus

Abstract

This paper studies the predictability of the Brent crude oil price. In accordance with previous literature, we find that the simple no-change forecast works better than forecasts based on futures prices over short-term horizons (less than one year). However, futures-based forecasts perform better than the no-change forecast across long-term horizons (one to five years). Moreover, the best performing model is a model that imposes very little structure on the relationship between spot and futures prices.

Suggested Citation

  • Chu, Pyung Kun & Hoff, Kristian & Molnár, Peter & Olsvik, Magnus, 2022. "Crude oil: Does the futures price predict the spot price?," Research in International Business and Finance, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:riibaf:v:60:y:2022:i:c:s0275531921002324
    DOI: 10.1016/j.ribaf.2021.101611
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    Cited by:

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    2. Tao Xiong & Miao Li & Jia Cao, 2023. "Do Futures Prices Help Forecast Spot Prices? Evidence from China’s New Live Hog Futures," Agriculture, MDPI, vol. 13(9), pages 1-16, August.
    3. Gkillas, Konstantinos & Manickavasagam, Jeevananthan & Visalakshmi, S., 2022. "Effects of fundamentals, geopolitical risk and expectations factors on crude oil prices," Resources Policy, Elsevier, vol. 78(C).
    4. Zhang, Lixia & Bai, Jiancheng & Zhang, Yueyan & Cui, Can, 2023. "Global economic uncertainty and the Chinese stock market: Assessing the impacts of global indicators," Research in International Business and Finance, Elsevier, vol. 65(C).
    5. Bouteska, Ahmed & Hajek, Petr & Fisher, Ben & Abedin, Mohammad Zoynul, 2023. "Nonlinearity in forecasting energy commodity prices: Evidence from a focused time-delayed neural network," Research in International Business and Finance, Elsevier, vol. 64(C).

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