Timing strategy performance in the crude oil futures market

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Abstract

The rewards to speculative trading in the crude oil futures market are assessed. For investors who adopt timing strategies that maximise their (iso-elastic) utility during each trading session, the rewards can be economically significant providing that transaction costs are small. Moreover, we are able to show via a decomposition of performance that the bulk of this benefit is due to their ability to predict realised volatility (that is, the second realised moment). The benefits derived from predicting other realised moments either require unrealistic levels of skill (all odd moments) or an infeasible degree of risk aversion (the fourth moment and higher even moments).
Original languageEnglish
Pages (from-to)480-492
Number of pages13
JournalEnergy Economics
Volume66
Early online date4 Aug 2017
DOIs
Publication statusPublished - 4 Aug 2017

Keywords

  • Crude oil futures
  • Timing strategies
  • Realised moments
  • Volatility

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