Impact of speculator's expectations of returns and time scales of investment on crude oil price behaviors

Ling Yun He; Ying Fan; Yi Ming Wei

doi:10.1016/j.eneco.2008.07.006

Impact of speculator's expectations of returns and time scales of investment on crude oil price behaviors

Ling Yun He, Ying Fan, Yi Ming Wei^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

38 Citations (Scopus)

Abstract

Based on time series of crude oil prices (daily spot), this paper analyses price fluctuation with two significant parameters τ (speculators' time scales of investment) and ε (speculators' expectations of return) by using Zipf analysis technique, specifically, by mapping τ-returns of prices into 3-alphabeted sequences (absolute frequencies) and 2-alphabeted sequences (relative frequencies), containing the fundamental information of price fluctuations. This paper empirically explores parameters and identifies various types of speculators' cognition patterns of price behavior. In order to quantify the degree of distortion, a feasible reference is proposed: an ideal speculator. Finally, this paper discusses the similarities and differences between those cognition patterns of speculators' and those of an ideal speculator. The resultant analyses identify the possible distortion of price behaviors by their patterns.

Original language	English
Pages (from-to)	77-84
Number of pages	8
Journal	Energy Economics
Volume	31
Issue number	1
DOIs	https://doi.org/10.1016/j.eneco.2008.07.006
Publication status	Published - Jan 2009
Externally published	Yes

Keywords

Crude oil prices
Ideal speculator
Speculator's expectations of return
Time scales of investment
Zipf analysis technique

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10.1016/j.eneco.2008.07.006

Cite this

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title = "Impact of speculator's expectations of returns and time scales of investment on crude oil price behaviors",

abstract = "Based on time series of crude oil prices (daily spot), this paper analyses price fluctuation with two significant parameters τ (speculators' time scales of investment) and ε (speculators' expectations of return) by using Zipf analysis technique, specifically, by mapping τ-returns of prices into 3-alphabeted sequences (absolute frequencies) and 2-alphabeted sequences (relative frequencies), containing the fundamental information of price fluctuations. This paper empirically explores parameters and identifies various types of speculators' cognition patterns of price behavior. In order to quantify the degree of distortion, a feasible reference is proposed: an ideal speculator. Finally, this paper discusses the similarities and differences between those cognition patterns of speculators' and those of an ideal speculator. The resultant analyses identify the possible distortion of price behaviors by their patterns.",

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AU - Fan, Ying

AU - Wei, Yi Ming

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AB - Based on time series of crude oil prices (daily spot), this paper analyses price fluctuation with two significant parameters τ (speculators' time scales of investment) and ε (speculators' expectations of return) by using Zipf analysis technique, specifically, by mapping τ-returns of prices into 3-alphabeted sequences (absolute frequencies) and 2-alphabeted sequences (relative frequencies), containing the fundamental information of price fluctuations. This paper empirically explores parameters and identifies various types of speculators' cognition patterns of price behavior. In order to quantify the degree of distortion, a feasible reference is proposed: an ideal speculator. Finally, this paper discusses the similarities and differences between those cognition patterns of speculators' and those of an ideal speculator. The resultant analyses identify the possible distortion of price behaviors by their patterns.

KW - Crude oil prices

KW - Ideal speculator

KW - Speculator's expectations of return

KW - Time scales of investment

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Impact of speculator's expectations of returns and time scales of investment on crude oil price behaviors

Abstract

Keywords

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