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Noisy Inventory Announcements and Energy Prices

Authors

  • Marketa W. Halova,

    1. Marketa Halova is an Assistant Professor of Economics at the Department of Economics, Washington State University, Pullman, Washington
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  • Alexander Kurov,

    Corresponding author
    1. Alexander Kurov is an Associate Professor of Finance at the Department of Finance, West Virginia University, Morgantown, West Virginia
    • Corresponding author, Department of Finance, College of Business and Economics, West Virginia University, P.O. Box 6025, Morgantown, WV 26506. Tel: 304-293-7892, Fax: 304-293-3274, e-mail: alkurov@mail.wvu.edu

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  • Oleg Kucher

    1. Oleg Kucher is an Assistant Professor of Economics at the Department of Economics, Frostburg State University, Frostburg, Maryland
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  • We thank Arabinda Basistha, Harry Turtle, Chardin Wese Simen, seminar participants at the 2013 Eastern Finance Association Meetings, and an anonymous referee for helpful comments and suggestions. Special thanks to Jeremy Shockcor for his help with the inventory forecast data. Errors or omissions are our responsibility.

Abstract

This study examines the effect of oil and gas inventory announcements on energy prices. Previous estimates of this effect suffer from bias due to measurement error in inventory surprises. We utilize intraday futures data for three petroleum commodities and natural gas to estimate the price response coefficients using traditional event study regressions and the identification-through-censoring (ITC) technique proposed by Rigobon and Sack [Rigobon and Sack (2008). Asset prices and monetary policy (pp. 335–370). Chicago: University of Chicago Press]. The results show that the bias in OLS estimates of the price impact of inventory surprises is quite large. The ITC coefficient estimates are about twice as large as OLS estimates for petroleum commodities and about four times as large as OLS estimates for natural gas. These results imply that energy prices are more strongly influenced by unexpected changes in inventory than shown in previous research. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 34:911–933, 2014

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