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- Title
Are published oil price forecasts efficient?
- Authors
Moghaddam, Hussein; Dehnavi, Jalal; Wirl, Franz
- Abstract
Oil prices are crucial for a wide area of economic decisions ranging from households over business to economic policymaking. Therefore, oil price projections are a crucial input to economic models and to economic activity forecasts. This paper assesses the accuracy and efficiency of crude oil price forecasts published by different organisations, think tanks and companies. Since the sequence of published forecasts appears as smooth, the weak efficiency criterion is clearly violated. Even combining forecasts, cannot increase efficiency due to high correlation among various forecasts. This pattern of oil price forecasts can be attributed to combining myopia (use current oil price levels as a basis) with Hotelling‐type exponential growth. Another behavioural explanation in source of inefficiencies is that forecasters prefer to harmonise their forecasts with other forecasters in order to be not an outlier.
- Subjects
PETROLEUM sales &; prices; ECONOMIC policy; PETROLEUM supply &; demand forecasting; EXPONENTIAL functions; POLICY sciences
- Publication
OPEC Energy Review, 2019, Vol 43, Issue 1, p29
- ISSN
1753-0229
- Publication type
Article
- DOI
10.1111/opec.12138