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Journal articles
Oil market modelling: A comparative analysis of fundamental and latent factor approaches
Abstract : We formally compare fundamental factor and latent factor approaches to oil price modelling. Fundamental modelling has a long history in seeking to understand oil price movements, while latent factor modelling has a more recent and limited history, but has gained popularity in other financial markets. The two approaches, though competing, have not formally been compared as to effectiveness. For a range of short-medium-and long-dated WTI oil futures we test a recently proposed five-factor fundamental model and a Principal Component Analysis latent factor model. Our findings demonstrate that there is no discernible difference between the two techniques in a dynamic setting. We conclude that this infers some advantages in adopting the latent factor approach due to the difficulty in determining a well specified fundamental model.
Cited literature [48 references]
https://hal-rennes-sb.archives-ouvertes.fr/hal-01387596
Contributor : Steven Gouin Connect in order to contact the contributor
Submitted on : Tuesday, October 25, 2016 - 5:49:31 PM
Last modification on : Monday, November 13, 2017 - 1:20:01 PM
Contributor : Steven Gouin Connect in order to contact the contributor
Submitted on : Tuesday, October 25, 2016 - 5:49:31 PM
Last modification on : Monday, November 13, 2017 - 1:20:01 PM
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Dowling - Oil Market Modelling...
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