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Jumps in Oil Prices: The Role of Economic News

Author

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  • John Elder
  • Hong Miao
  • Sanjay Ramchander

Abstract

Previous research has been unable to identify a strong link between crude oil prices and economic news. We reexamine this relationship using high frequency intraday data and relatively new methodology to estimate jumps in oil prices. We find a surprisingly strong correspondence between high frequency jumps in oil prices and the arrival of new economic information, with the largest jumps tending to be preceded identifiable economic news. These results indicate that oil prices respond very rapidly to new economic data in ways that appear consistent with economic theory, and also suggest that economic news, rather than speculation unrelated to the economic environment, drives jumps in oil prices.

Suggested Citation

  • John Elder & Hong Miao & Sanjay Ramchander, 2013. "Jumps in Oil Prices: The Role of Economic News," The Energy Journal, , vol. 34(3), pages 217-237, July.
    • Handle: RePEc:sae:enejou:v:34:y:2013:i:3:p:217-237
    DOI: 10.5547/01956574.34.3.10
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    References listed on IDEAS

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    1. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(1 (Spring), pages 215-283.
    2. repec:bla:jfinan:v:59:y:2004:i:2:p:755-793 is not listed on IDEAS
    3. Suzanne S. Lee & Per A. Mykland, 2008. "Jumps in Financial Markets: A New Nonparametric Test and Jump Dynamics," The Review of Financial Studies, Society for Financial Studies, vol. 21(6), pages 2535-2563, November.
    4. Torben G. Andersen & Tim Bollerslev & Per Frederiksen & Morten Ørregaard Nielsen, 2010. "Continuous-time models, realized volatilities, and testable distributional implications for daily stock returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(2), pages 233-261.
    5. repec:taf:jnlbes:v:30:y:2012:i:2:p:242-255 is not listed on IDEAS
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    Cited by:

    1. Stephen Snudden, 2024. "Don’t Ruin the Surprise: Temporal Aggregation Bias in Structural Innovations," LCERPA Working Papers jc0149, Laurier Centre for Economic Research and Policy Analysis, revised Nov 2024.

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