Preferences of risk-averse and risk-seeking investors for oil spot and futures before, during and after the Global Financial Crisis

Hooi Hooi Lean, Michael McAleer, Wing Keung WONG*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

21 Citations (Scopus)


This paper examines risk-averse and risk-seeking investor preferences for oil spot and futures prices by using the mean-variance (MV) criterion, the CAPM statistics, and stochastic dominance (SD) approach. The MV criterion shows that risk averters are indifferent from the oil spot and futures but risk seekers prefer to invest in oil futures to spot. The information drawn from the CAPM statistics does not lead to any preference between spot and futures prices. Our SD results reveal that risk-averse investors prefer the spot index, whereas risk seekers are attracted to the futures index to maximize expected utility, though not their expected wealth for the entire period as well as for the sub-period (pre-GFC) before the 2008 Global Financial Crisis (GFC) and the sub-period during and after the GFC (GFC). To compare the performance of spot in pre-GFC and GFC sub-periods, we find that the 2008 GFC has no impact on the means, variances, and the CAPM statistics. In addition, our SD analysis reveals that spots from pre-GFC and GFC do not dominate each other, both risk averters and risk seekers are indifferent from the spots from pre-GFC and GFC, there is no arbitrage opportunity for spots before and after GFC, and the spot market is efficient to the GFC crisis. The same conclusion is drawn on the impact of the GFC on the futures. The findings in our paper could provide more information to academics, practitioners, and policy makers in their decision toward oil spot and futures markets as well as toward the impact of any financial crisis in the future.

Original languageEnglish
Pages (from-to)204-216
Number of pages13
JournalInternational Review of Economics and Finance
Publication statusPublished - 2015

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • Futures market
  • Risk averter
  • Risk seeker
  • Spot market
  • Stochastic dominance


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