00000nam 2200000za 4500 9.816417 CaOODSP 20221107142240 cr ||||||||||| 160427s2016 oncd ob f000 0 eng d CaOODSP eng eng fre n-cn--- FB3-5/2016-18E-PDF Baumeister, Christiane. A general approach to recovering market expectations from futures prices with an application to crude oil [electronic resource] / by Christiane Baumeister and Lutz Kilian. [Ottawa] : Bank of Canada, 2016. iii, 35, 10 p. : fig., tables Staff Working Paper, 1701-9397 ; 2016-18 "April 2016." Includes bibliographical references (p. 24-27). Futures markets are a potentially valuable source of information about price expectations. Exploiting this information has proved difficult in practice, because time-varying risk premia often render the futures price a poor measure of the market expectation of the price of the underlying asset. Although this expectation in principle may be recovered by adjusting the futures price by the estimated risk premium, a common problem is that there are as many measures of the market expectation as there are estimates of the risk premium. We propose a general solution to this problem that allows us to select the most accurate estimate of the expectation for any set of risk premium estimates. We illustrate this approach by solving the long-standing problem of how to estimate the market expectation of the price of crude oil. We provide a new measure of oil price expectations that is substantially more accurate than the alternatives and more economically plausible. Our analysis has implications for the estimation of economic models of energy-intensive durables, for oil price forecasting and for the measurement of oil price shocks. gccst Markets gccst Petroleum gccst Prices gccst Statistical analysis Kilian, Lutz. Bank of Canada. Staff working paper (Bank of Canada) 1701-9397 ; 2016-18 (CaOODSP)9.806221 PDF 845 KB https://publications.gc.ca/collections/collection_2016/banque-bank-canada/FB3-5-2016-18-eng.pdf