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

Author

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  • Ding Du

    (Northern Arizona University)

  • Xiaobing Zhao

    (Northern Arizona University)

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.

Suggested Citation

  • Ding Du & Xiaobing Zhao, 2017. "Financial investor sentiment and the boom/bust in oil prices during 2003–2008," Review of Quantitative Finance and Accounting, Springer, vol. 48(2), pages 331-361, February.
    • Handle: RePEc:kap:rqfnac:v:48:y:2017:i:2:d:10.1007_s11156-016-0553-5
    DOI: 10.1007/s11156-016-0553-5
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    3. Qadan, Mahmoud & Idilbi-Bayaa, Yasmeen, 2020. "Risk appetite and oil prices," Energy Economics, Elsevier, vol. 85(C).
    4. Atri, Hanen & Kouki, Saoussen & Gallali, Mohamed imen, 2021. "The impact of COVID-19 news, panic and media coverage on the oil and gold prices: An ARDL approach," Resources Policy, Elsevier, vol. 72(C).
    5. Chen, Jinyu & Zhu, Xuehong & Zhong, Meirui, 2019. "Nonlinear effects of financial factors on fluctuations in nonferrous metals prices: A Markov-switching VAR analysis," Resources Policy, Elsevier, vol. 61(C), pages 489-500.
    6. Fasanya, Ismail & Adekoya, Oluwasegun & Oyewole, Oluwatomisin & Adegboyega, Soliu, 2022. "Investor sentiment and energy futures predictability: Evidence from Feasible Quasi Generalized Least Squares," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).

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