An Analysis Of The Financialization Of Oil Market Influences On Volatility Of Oil Prices

Oil has a significant position in society as a crucial input to global. Therefore, it is a strategic resource that attracts the interest and attention of nearly everyone. With the trend of globalization continues to enhance, the oil market is more mature, and the influence of oil to the economy is growing. The connotation and denotation of oil prices also continue enriching and developing. Oil has developed a personality, as a physical commodity but also now as a financial asset exist in the international energy market and the financial markets.Based on the considering upwards, taking the oil price volatility as the kernel, the study tries to grope for the nature attribute of the oil, as well as the financial investment object attributes, through the studying the phenomenon of price fluctuation in crude oil financial market. So, this study establishing a realistic oil market model from the perspective of behavioural finance, analyses the relative importance of fundamental and non-fundamental demand on oil futures price volatility. Through behavioural paradigm theories, finding the oil market in the recent period is not as efficient as predicted by the efficient market hypothesis. Furthermore, bounded rationality and heterogeneity of the investors in the oil decision process could not be ignored, which helps us to understand the "anomalies" in oil market that cannot be explained by the classical financial theory.The innovation of this dissertation is mainly reflected in the following aspects:First, this dissertation makes the oil price volatility as the theme, from the perspective of behavioural finance to study the impact of the different types of agents’behavior on oil price volatility. Although thesis studying on oil price are numerous, but relevant papers from this perspective have not been seen frequently.Second, the traditional financial theory is no longer applicable to the current oil market, and also can not be used to explain the "anomalies" in the oil market in the period2003to2008. The aim of dissertation is analyse the oil price dynamics by supplementing the traditional theory of fundamental with the theories from behavioural finance. The main finding of thesis showed that since2003, speculation is largely distorted the formation of oil price, movements in oil prices are best explained by speculation.Third, the study presents a theoretical heterogeneous agent model of the oil futures market based on noise trading, and distinguishes between commercial traders and non-commercial traders, to study the interaction between the oil future price volatility and the presence of different types of agents. Then, empirically test the theoretical model by estimating a Markov-switching model with time-varying transition probabilities. Found that, since2004, the state transition in the oil market has become more frequent, especially the trend chasing state dominant position. A significant feature of the model is that the agents behavior combined with the oil market, to some extent, overcome the simple interpretation of the fluctuations in oil prices from fundamental factors.Fourth, futures market of China is more in line with "behavioral paradigm" than "rational paradigm", so, the research of fuel oil futures in China from the perspective of the behavioural paradigm is much better.