Can an energy futures index predict us stock market index movements?

dc.contributor.author Gurrib, Ikhlaas
dc.date.accessioned 2020-01-23T12:30:30Z
dc.date.available 2020-01-23T12:30:30Z
dc.date.copyright 2018 en_US
dc.date.issued 2018
dc.description This article is not available at CUD collection. The version of scholarly record of this Article is published in International Journal of Energy Economics and Policy (2018), available online at: https://www.econjournals.com/index.php/ijeep/article/view/6622. en_US
dc.description.abstract This paper investigates if an energy futures conditions index (EFCI) can predict movements of US major stock market indices. While various financial conditions indices provide information about the financial stress of a country, the existence of an energy conditions index, using futures markets, is scarce. Using weekly data over 1992-2017, this paper proposes an energy futures index using principal component analysis and test its predictability. The EFCI captures 95% of the variability inherent in the crude oil, heating oil and natural gas futures total reportable positions. Stability in forecast errors over different lags suggests 1 week lag is sufficient in forecasting weekly Nasdaq Composite Index, Nasdaq 100 and Russell 3000 values. 95% prediction levels support that the estimated model captures all actual market indices values, except for the 2000 technology bubble. The inability of the energy futures index in predicting stock market indices during the 2000 bubble can be explained by the poor sensitivity of energy futures to this specific event. Distributions were non-normal, not serially correlated and homoscedastic under the whole sample period, with diagnostics on pre and post technology bubble crisis showing mixed results. © 2018, Econjournals. All rights reserved. en_US
dc.identifier.citation Gurrib, I. (2018). Can an energy futures index predict us stock market index movements? International Journal of Energy Economics and Policy, 8(5), 230–240. https://www.econjournals.com/index.php/ijeep/article/view/6622 en_US
dc.identifier.issn 21464553
dc.identifier.uri https://www.econjournals.com/index.php/ijeep/article/view/6622
dc.identifier.uri https://hdl.handle.net/20.500.12519/24
dc.language.iso en en_US
dc.publisher Econjournals en_US
dc.relation Author Affiliation: Gurrib, I., Faculty of Management, Canadian University Dubai, United Arab Emirates
dc.relation.ispartofseries International Journal of Energy Economics and Policy;Vol. 8, no. 5
dc.rights All articles published by IJEEP are made immediately available worldwide under an open access license.
dc.rights.holder Copyright : 2018 Econjournals. All rights reserved.
dc.rights.uri https://www.econjournals.com/index.php/ijeep/about/editorialPolicies#openAccessPolicy
dc.subject Energy futures en_US
dc.subject Reportable position en_US
dc.subject Stock market index en_US
dc.title Can an energy futures index predict us stock market index movements? en_US
dc.type Article en_US
Files
License bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
license.txt
Size:
1.71 KB
Format:
Item-specific license agreed upon to submission
Description: