Abstract
We use sequential energy inventory announcements to shed new light on the informational efficiency of financial markets. Our findings provide clear evidence of inefficiency in crude oil futures and stock markets. This inefficiency can be exploited by sophisticated traders. We examine the effect of market liquidity on the efficient incorporation of information in this setting. We also construct a predictor that can predict inventory surprises and preannouncement returns in-sample and out-of-sample. Finally, we develop a combination forecast that can be used as a proxy for market expectations of oil inventory announcements.