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Finding Evidence of Irrational Exuberance in the Oil Market

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Part of the Lecture Notes in Business Information Processing book series (LNBIP,volume 217)

Abstract

The availability of novel information may significantly affect the evolution of asset prices. Nonetheless, investors are influenced not only by the quantitative facts but also by the textual content of news disclosures. In this paper, we examine whether news reception in the oil market is time-dependent using a rolling window regression. Our findings suggest that news reception does indeed have a significant effect on returns and we further find evidence for exaggerated news reception as it comes along with a feedback loop. Thus, we succeed in measuring the situation Shiller terms “irrational exuberance”.

Keywords

  • Irrational exuberance
  • Information processing
  • Oil market
  • Rolling window regression
  • Sentiment analysis

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Notes

  1. 1.

    CBS News. Oil Trading’s Powerful “Dark Markets”. 2011. URL: http://www.cbsnews.com/2100-18564_162-4188620.html, accessed September 9, 2014.

  2. 2.

    OPEC. 2013 World Oil Outlook. URL: http://www.opec.org/opec_web/static_files_project/media/downloads/publications/WOO_2013.pdf, accessed September 9, 2014.

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Correspondence to Stefan Feuerriegel .

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Ratku, A., Feuerriegel, S., Rabhi, F.A., Neumann, D. (2015). Finding Evidence of Irrational Exuberance in the Oil Market. In: Lugmayr, A. (eds) Enterprise Applications and Services in the Finance Industry. FinanceCom 2014. Lecture Notes in Business Information Processing, vol 217. Springer, Cham. https://doi.org/10.1007/978-3-319-28151-3_4

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  • DOI: https://doi.org/10.1007/978-3-319-28151-3_4

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