add extra spice for russian export

Author: je-suis-tm

Oil Money project/README.md

@@ -92,11 +92,11 @@ It turns out that our momentum trading is much more robust and profitable than o
 
 ### Russian Rubles and Urals Crude
 
-For Norway, I may have doubts in how much petroleum business contributes to its overall GDP. As for Russia, I doubt if any person in her/his rightful mind would question the role of oil in the economy of Russia. According to <a href=https://en.wikipedia.org/wiki/Economy_of_Russia>Wikipedia</a>, Russian oil business (mostly Rosneft) accounted for 16% of GDP, 52% of federal budget revenues and over 70% of total exports in 2012. Usually, countries with large natural resource reserves suffer from Dutch Disease (USA is an exception), especially Russia! Hence, we don't need any extra step to validate if Russian Ruble is a petrocurrency.
+For Norway, I may have doubts in how much petroleum business contributes to its overall GDP. As for Russia, I suspect if any person in her/his rightful mind would question the role of oil in the economy of Russia. According to <a href=https://en.wikipedia.org/wiki/Economy_of_Russia>Wikipedia</a>, Russian oil business (mostly Rosneft) accounted for 16% of GDP, 52% of federal budget revenues and over 70% of total exports in 2012. Usually, countries with large natural resource reserves suffer from Dutch Disease (USA is an exception), especially Russia! Hence, we don't need any extra step to validate if Russian Ruble is a petrocurrency.
 
 First step, let's identify the regressors. If we look at <a href=http://www.worldstopexports.com/russias-top-import-partners>trade statistics</a>, the biggest trading partners with Russia are EU, China, Ukraine, Belarus, Japan and Korea. Belarusian Ruble BYR is very strange. It has been pegged to both Russian Ruble and US dollar. But the central bank interferes the currency rate too frequently. I would argue the currency regime is a completely mess (thanks to oligarchs). I'd rather not include Belarusian Ruble as it is not a big player in global or regional economy. So we are left with Euro, Chinese Yuan, Ukrainian Hryvnia, Japanese Yen and Korean Won. 
 
-Australia, another country with rich natural resources, basically don't make many direct trades with Russia which is fantastic. We can use Australian dollar as the base to evaluate RUB,EUR,CNY,UAH,JPY and KRW. Instead of Brent, Russia has its own version of blending called Urals. We would take Urals spot price as a benchmark for oil. Apart from Urals, Russia also exports natural gas to Europe via Gazprom. The best benchmark for natural gas is Dutch TTF gas future contracts. When the tension of Nord Stream 2 pipeline is settled, the benchmark is probably gonna be German NCG gas future contracts (or maybe some extra benchmarks for South Stream and Power of Siberia). There we go, the preparation is done.
+Australia, another country with rich natural resources, basically doesn't make many direct trades with Russia. Fantastic! Australian dollar can be leveraged as the base to evaluate RUB,EUR,CNY,UAH,JPY and KRW. Instead of Brent, Russia has its own version of blending called Urals. We would take Urals spot price as a benchmark for oil. Apart from Urals, Russia also exports natural gas to Europe via Gazprom. The best benchmark for natural gas in the continent is Dutch TTF gas future contracts. When the tension of Nord Stream 2 pipeline is settled, the benchmark is probably gonna be German NCG gas future contracts (or maybe some extra benchmarks for South Stream and Power of Siberia). The saying goes, gas is the power and oil is the money when it comes to Russian exports. There we go, the preparation is done.
 
 Yet, Russian Ruble is very special. Russia has been sanctioned by US and EU for so many times (really feel sorry for those innocent Russian civilians). To know when and what, someone actually creates a <a href=https://www.rferl.org/a/russia-sanctions-timeline/29477179.html>timeline</a> for us. Each major sanction should make a huge impact on the currency. In this case, we use a method called <a href=https://en.wikipedia.org/wiki/Stepwise_regression>stepwise regression</a> to test each potential regressor for each year. We would pick out the R squared winners out of 7 variables from the past 4 years to construct a robust model. The figure below shows R squared of each variable for each year.