Social and Behavioral Sciences Commons^™

The Effects Of Market Sentiment On Crude Oil Futures Markets, Nathan Somayaji

Honors Theses

This paper uses a behavioral finance approach to examine the effect of psychological factors on pricing in futures markets. Specifically, I assess the impact of the contemporaneous market sentiment on price discovery in crude oil futures markets. A considerable amount of previous research has shown that futures prices in crude oil markets lead spot prices, as futures act as a mechanism for determining spot prices. My analysis addresses whether the lead-lag relationship between futures and spot varies with differing market sentiment. I hypothesize that futures pricing will lead in times of increased uncertainty due to lower transactions costs and greater …