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Unit root properties of crude oil spot and futures prices

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Author Info
Maslyuk, Svetlana
Smyth, Russell

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Abstract

In this article, we examine whether WTI and Brent crude oil spot and futures prices (at 1, 3 and 6 months to maturity) contain a unit root with one and two structural breaks, employing weekly data over the period 1991-2004. To realise this objective we employ Lagrange multiplier (LM) unit root tests with one and two endogenous structural breaks proposed by Lee and Strazicich [2003. Minimum Lagrange multiplier unit root test with two structural breaks. Review of Economics and Statistics, 85, 1082-1089; 2004. Minimum LM unit root test with one structural break. Working Paper no. 04-17, Department of Economics, Appalachian State University]. We find that each of the oil price series can be characterised as a random walk process and that the endogenous structural breaks are significant and meaningful in terms of events that have impacted on world oil markets.

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Publisher Info
Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 36 (2008)
Issue (Month): 7 (July)
Pages: 2591-2600
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Handle: RePEc:eee:enepol:v:36:y:2008:i:7:p:2591-2600

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