Uncovering predictability in the evolution of the WTI oil futures curve

Accurately forecasting the price of oil, the world's most actively traded commodity, is of great importance to both academics and practitioners. We contribute by proposing a functional time series based method to model and forecast oil futures. Our approach boasts a number of theoretical and practical advantages including effectively exploiting underlying process dynamics missed by classical discrete approaches. We evaluate the finite-sample performance against established benchmarks using a model confidence set test. A realistic out-of-sample exercise provides strong support for the adoption of our approach with it residing in the superior set of models in all considered instances.Comment: 28 pages, 4 figures, to appear in European Financial Managemen

Oil and the Macroeconomy in a Changing World: A Conference Summary

Analysis of oil-price movements is once again an important feature of economic policy discussions. To provide some background for this analysis, this paper summarizes a conference on the oil market held at the Federal Reserve Bank of Boston in June 2010. Four cross-cutting themes emerged from this symposium, which included scientific experts, market participants, business leaders, academics, and policymakers. First, the decline in real oil prices that followed the 1970s' oil shocks is unlikely to be repeated today, because there are fewer ways in which oil-importing countries can reduce oil demand or expand domestic supplies in response to higher prices. The second lesson of the conference, however, is that any prediction about oil markets is highly uncertain, a fact illustrated by the wide confidence intervals that result when futures-market data are used to quantify forecast uncertainty. Third, there is little consensus on whether new financial investment in commodity index funds has increased the volatility of oil prices. Finally, changes in oil prices still have large effects on the economy. Some research suggests that the rapid run-up in oil prices in 2007-08 may have significantly weakened the U.S. economy in the early stages of the Great Recession

A multicentred study to validate a consensus bleeding assessment tool developed by the biomedical excellence for safer transfusion collaborative for use in patients with haematological malignancy

Background There continues to be uncertainty about the optimal approach to documenting bleeding data in platelet transfusion trials, with a desire to apply a common assessment tool across all trials. With this in mind, a consensus bleeding assessment tool (BAT) has been developed by the Biomedical Excellence for Safer Transfusion (BEST) collaborative, based on review of data collection forms used in published randomized trials and following content validation with a range of healthcare professionals at seven haematology centres through BEST members. This study aimed to evaluate reliability and reproducibility of the consensus BAT. Methods Replicated clinical assessments of bleeding were undertaken by participants with haematological malignancies recruited at four haematology centres in an international, multicentred, observational study. Concordance of repeat assessments was calculated for agreement in site and grade of bleeding observed. Results Forty patients consented to participate, and 13 trained bleeding assessors collected these data. Bleeding assessments were carried out on 113 separate days. Of all 225 bleeding assessments, 204 were compared for grade concordance, and 160 were compared for site concordance. There was very good grade concordance (83%, 95% confidence interval 74–93%) and good bleeding site concordance (69%, 95% confidence interval 57–79%) in observations of bleeding. Discordance was primarily in relation to assessing skin bleeding. Conclusions Alongside a structured training programme, levels of concordance for a consensus BAT were high. Researchers using assessment tools for bleeding need to balance comprehensive data collection against potential loss of accuracy for some types of bleeding, such as skin findings

Informational Efficiency in Futures Markets for Crude Oil

This paper develops a methodology to test whether recent developments on world oil markets are in line with the hypothesis of efficient markets. We treat the joint hypothesis problem as stated by Fama (1970), Fama (1991), that market efficiency can only be assessed in conjunction with a price model of market equilibrium. Data on spot and futures prices for Brent crude oil in the period 2002-2008 are used in combination with a multi factor model to investigate whether futures prices are efficient forecasts of future spot prices. The hypothesis of market efficiency is assessed by comparing the observed developments of crude oil spot prices to the ex-ante expected distributions of spot prices using the Rosenblatt transform. For the Brent crude oil futures market, the results are in line with the hypothesis of market efficiency in the short-term but during our sample period the hypothesis is refuted when forecast horizons of one year are considered. Our findings suggest that it can lead to rather wrong investment decisions when relying on longer-term crude oil futures prices and the information contained therein

Empirical Research on Sovereign Debt and Default

The long history of sovereign debt and the associated enforcement problem have attracted researchers in many fields. In this paper, we survey empirical work by economists, historians, and political scientists. As we review the empirical literature, we emphasize parallel developments in the theory of sovereign debt. One major theme emerges. Although recent research has sought to balance theoretical and empirical considerations, there remains a gap between theories of sovereign debt and the data used to test them. We recommend a number of steps that researchers can take to improve the correspondence between theory and data

The dynamics of commodity return comovements

We compare factor models with respect to their ability to explain commodity futures return comovements. A simple one-factor model based on the first principal component extracted from a panel of commodity returns outperforms a macroeconomic model, and explains most of the realized comovements. We find that intersectoral correlations display more time variations than intrasectoral correlations. Dissecting the evidence further, we find that comovements are driven by the variation of the factor as opposed to exposure to it. Our results cast doubt on the persistence of the effects of financialization and emphasize the importance of the dynamics of the factor variance