Date of Award


Document Type


Degree Name

Bachelor of Science



First Advisor

Dr. Jerry Stevens


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 business decision making flexibility relative to futures. Based on the NBER recession classifications, I categorize historical time periods in terms of the two categories of Optimism and Pessimism, using Granger Causality tests to determine the price discovery in crude oil markets. The findings suggest that futures lead spot prices during times of greater uncertainty and over the long-term.

Included in

Economics Commons