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A reappraisal of the chaotic paradigm for energy commodity prices

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  • Mastroeni, Loretta
  • Vellucci, Pierluigi
  • Naldi, Maurizio

Abstract

Energy commodity prices have been examined over the last 20 years to detect the presence of chaos as an alternative to stochastic models, with contrasting results. In this paper, we wish to reassess the chaotic paradigm in the light of two new pieces of information with respect to the literature: the appearance of noise-aware estimation methods for the correlation entropy and the availability of longer time series. Our analysis shows that the literature has heavily underestimated the presence of noise, and that chaotic characteristics coexist with stochastic ones in the time series of prices. Through the recurrence quantification analysis, we have also observed the presence of intermittency, where periods of regular behaviour are replaced by periods of chaotic behaviour, which could explain the emergence of bubbles.

Suggested Citation

  • Mastroeni, Loretta & Vellucci, Pierluigi & Naldi, Maurizio, 2019. "A reappraisal of the chaotic paradigm for energy commodity prices," Energy Economics, Elsevier, vol. 82(C), pages 167-178.
    • Handle: RePEc:eee:eneeco:v:82:y:2019:i:c:p:167-178
    DOI: 10.1016/j.eneco.2018.04.024
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    Cited by:

    1. Mastroeni, Loretta & Mazzoccoli, Alessandro & Quaresima, Greta & Vellucci, Pierluigi, 2021. "Decoupling and recoupling in the crude oil price benchmarks: An investigation of similarity patterns," Energy Economics, Elsevier, vol. 94(C).
    2. Loretta Mastroeni & Pierluigi Vellucci, 2022. "Construction of an SDE Model from Intraday Copper Futures Prices," Risks, MDPI, vol. 10(11), pages 1-21, November.
    3. Ashe, Sinéad & Egan, Paul, 2023. "Examining financial and business cycle interaction using cross recurrence plot analysis," Finance Research Letters, Elsevier, vol. 51(C).
    4. Benedetto, Francesco & Mastroeni, Loretta & Quaresima, Greta & Vellucci, Pierluigi, 2020. "Does OVX affect WTI and Brent oil spot variance? Evidence from an entropy analysis," Energy Economics, Elsevier, vol. 89(C).
    5. Ata Ozkaya, 2022. "Detecting multiple-equilibria and chaos in oil prices and global commodity markets," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(6), pages 350-361, September.
    6. Hafezi, Reza & Akhavan, AmirNaser & Pakseresht, Saeed & A. Wood, David, 2021. "Global natural gas demand to 2025: A learning scenario development model," Energy, Elsevier, vol. 224(C).
    7. Orlando, Giuseppe & Bufalo, Michele, 2022. "Modelling bursts and chaos regularization in credit risk with a deterministic nonlinear model," Finance Research Letters, Elsevier, vol. 47(PA).
    8. Pierluigi Vellucci, 2021. "A critique of financial neoliberalism: a perspective combining multidisciplinary methods and commodity markets," SN Business & Economics, Springer, vol. 1(3), pages 1-11, March.

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