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Crude oil market efficiency: An empirical investigation via the Shannon entropy

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  • Walid Mensi
  • Chaker Alaoui
  • Khuong Nguyen

Abstract

This paper evaluates the time-varying degrees of weak-form efficiency of the crude oil markets using the Modified Shannon Entropy (MSE) and the Symbolic Time Series Analysis (STSA) approach. Using daily data from May 20, 1987 to March 6, 2012 for two worldwide crude oil benchmarks (West Texas Intermediate and Europe Brent), our findings reveal that the weak-form market efficiency of two oil markets evolves through time, but with different time trends. Moreover, the WTI market appears to be less efficient than the Europe Brent. These results have several implications for commodity portfolio hedgers and policymakers.

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File URL: http://www.cepii.fr/IE/resumeEI.asp?NoDoc=4479
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Bibliographic Info

Article provided by CEPII research center in its journal International Economics/Economie Internationale.

Volume (Year): (2012)
Issue (Month): 129 ()
Pages: 119-137

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Handle: RePEc:cii:cepiei:2012-q1-129-5

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Related research

Keywords: Oil Prices; Information Theory; Shannon Entropy; Market Efficiency;

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