We backtest 59 instruments and investigate the predictability of daily returns using Bayesian variable selection methods. Through these models we show the importance of variable selection and reduction of over tting. We also visualize how... more
We backtest 59 instruments and investigate the predictability of daily returns using Bayesian variable selection methods. Through these models we show the importance of variable selection and reduction of over tting. We also visualize how the driving factors of daily returns from di erent classes vary over time. Predicting daily returns' magnitude is again con rmed to be a hard task but we show that for some instruments it is possible to achieve above average hit-rates that could lead to pro table strategies. Simulation results show that predictability levels of daily returns also vary over time.
This chapter centers on the question of whether futures markets can be used in the competitive price discovery in crude oil markets. On the one hand, the survey in this chapter uncovers considerable evidence on the theoretical perspective... more
This chapter centers on the question of whether futures markets can be used in the competitive price discovery in crude oil markets. On the one hand, the survey in this chapter uncovers considerable evidence on the theoretical perspective that future prices of crude oil is equal to the spot price of crude oil, plus the cost of carry plus the endogenous convenience yield. On the other hand, through the empirical findings built on the Alquist and Kilian (2010) model, this chapter concurs with the previous studies documenting that futures crude oil prices are uninformative for forecasting spot crude oil prices.
