The dynamic impact of investor climate sentiment on the crude oil futures market: Evidence from the Chinese market
Wenwen Liu, Miaomiao Tang, Peng Zhao
TL;DR
This paper examines how investor climate sentiment affects crude oil futures volatility in China, finding that it becomes a key factor over time.
Contribution
The study introduces a new approach using the Thermal Optimal Path method to analyze investor climate sentiment's dynamic impact on oil futures volatility.
Findings
Investor climate sentiment increasingly influences crude oil futures volatility over time.
Incorporating investor climate sentiment improves volatility prediction accuracy in the HAR model.
The Thermal Optimal Path method effectively reveals the guiding effect of investor sentiment on market volatility.
Abstract
Climate risk has become a hot topic of global concern. This paper aims to explore the impact of investor climate sentiment (ICS) on China’ s crude oil futures market, covering the period from March 27, 2018, to December 30, 2022. Firstly, this paper employs the Thermal Optimal Path (TOP) method and discovers that the guiding effect of ICS on the volatility of crude oil futures (RVoil) intensifies over time, progressively becoming a pivotal factor in determining volatility. Secondly, based on the lead-lag relationship between ICS and RVoil, this study divides the sample period into five stages and confirms through the HAR model that ICS has a significant inhibitory effect on crude oil volatility during the guiding phase. In addition, incorporating ICS into the HAR model not only improves the model’ s goodness of fit but also significantly reduces the prediction error in out-of-sample…
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Taxonomy
TopicsMarket Dynamics and Volatility · Energy, Environment, Economic Growth · Energy Load and Power Forecasting