An Analysis of Natural Gas Commodity Analyst Forecasting and Natural Gas Market Prices
Mittal, Rishi Kumar
Area of Honors:
Bachelor of Science
Dr. George David Haushalter, Thesis Supervisor James Alan Miles, Honors Advisor
Finance Commodity Forecasting Natural Gas Trading Strategy Ranking
The thesis explores the effect commodity analyst’s forecasting rank and ability has on the natural gas market. The thesis examines first how the market prices the natural gas commodity in regards to analyst estimates. It answers the question on whether the market prices the commodity based on the mean of the analyst estimates or the markets view of a “top analyst.” Secondly, the thesis explores if analysts forecasting ability gets better through time and if the analyst tend to turnover if their forecasting ability does not improve. Finally, the thesis explores a trading strategy based on the market’s view of a top analyst and compares the return against a benchmark. The thesis finds that the market prices respond more to the mean analyst estimate, rather than the markets view of a top analyst estimate. The paper also finds that relative forecasting ability does tend to get better with time otherwise the analysts tend to turnover. Finally, the paper identifies that a trading strategy based on the market’s view of the top analyst is not viable.