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Time-varying predictability in crude-oil markets: the case of GCC countries

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  • El Hedi Arouri, Mohamed
  • Huong Dinh, Thanh
  • Khuong Nguyen, Duc

Abstract

This paper uses a time-varying parameter model with generalized autoregressive conditional heteroscedasticity effects to examine the dynamic behavior of crude-oil prices for the period February 7, 1997-January 8, 2010. Using data from four countries of the Gulf Cooperation Council, we find evidence of short-term predictability in oil-price changes over time, except for several short sub-periods. However, the hypothesis of convergence towards weak-form informational efficiency is rejected for all markets. In addition, we explore the possibility of structural breaks in the time-paths of the estimated predictability indices and detect only one breakpoint, for the oil markets in Qatar and the United Arab Emirates. Our empirical results therefore call for new empirical research to further gauge the predictability characteristics and the determinants of oil-price changes.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 38 (2010)
Issue (Month): 8 (August)
Pages: 4371-4380

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Handle: RePEc:eee:enepol:v:38:y:2010:i:8:p:4371-4380

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Web page: http://www.elsevier.com/locate/enpol

Related research

Keywords: Oil-price behavior Weak-form efficiency Kalman filter;

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References

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Citations

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Cited by:
  1. Jouini, Jamel & Harrathi, Nizar, 2014. "Revisiting the shock and volatility transmissions among GCC stock and oil markets: A further investigation," Economic Modelling, Elsevier, vol. 38(C), pages 486-494.
  2. Mohamed El Hedi Arouri & Jamel Jouini & Duc Khuong Nguyen, 2013. "On the relationship between world oil prices and GCC stock markets," Working Papers hal-00798037, HAL.
  3. Arouri, Mohamed & Teulon, Frédéric & Rault, Christophe, 2013. "Equity risk premium and regional integration," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 79-85.
  4. Mohamed El Hedi Arouri & Shawkat Hammoudeh & Amine Lahiani & Duc Khuong Nguyen, 2013. "Long memory and structural breaks in modeling the return and volatility dynamics of precious metals," Working Papers hal-00798033, HAL.
  5. Mohamed El Hedi Arouri & Amine Lahiani & Duc Khuong Nguyen, 2013. "World gold prices and stock returns in China: insights for hedging and diversification strategies," Working Papers hal-00798038, HAL.
  6. Komijani, Akbar & Naderi, Esmaeil & Gandali Alikhani, Nadiya, 2013. "A Hybrid Approach for Forecasting of Oil Prices Volatility," MPRA Paper 44654, University Library of Munich, Germany.
  7. Arouri, Mohamed El Hedi & Jouini, Jamel & Nguyen, Duc Khuong, 2012. "On the impacts of oil price fluctuations on European equity markets: Volatility spillover and hedging effectiveness," Energy Economics, Elsevier, vol. 34(2), pages 611-617.
  8. Jouini, Jamel, 2013. "Return and volatility interaction between oil prices and stock markets in Saudi Arabia," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 1124-1144.
  9. Ben Rejeb, Aymen & Boughrara, Adel, 2013. "Financial liberalization and stock markets efficiency: New evidence from emerging economies," Emerging Markets Review, Elsevier, vol. 17(C), pages 186-208.
  10. Mohamed El Hedi Arouri & Shawkat Hammoudeh & Duc Khuong Nguyen & Amine Lahiani, 2013. "On the short- and long-run efficiency of energy and precious metal markets," Working Papers hal-00798036, HAL.
  11. Mensi, Walid & Hammoudeh, Shawkat & Yoon, Seong-Min, 2014. "How do OPEC news and structural breaks impact returns and volatility in crude oil markets? Further evidence from a long memory process," Energy Economics, Elsevier, vol. 42(C), pages 343-354.
  12. Heni Boubaker & Nadia Sghaier, 2013. "Instability and time-varying dependence structure between oil prices and stock markets in GCC countries," Working Papers 2013-023, Department of Research, Ipag Business School.
  13. Zhang, Bing & Li, Xiao-Ming & He, Fei, 2014. "Testing the evolution of crude oil market efficiency: Data have the conn," Energy Policy, Elsevier, vol. 68(C), pages 39-52.
  14. El Hedi Arouri, Mohamed & Jouini, Jamel & Nguyen, Duc Khuong, 2011. "Volatility spillovers between oil prices and stock sector returns: Implications for portfolio management," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1387-1405.
  15. Lin, Boqiang & Wesseh, Presley K. & Appiah, Michael Owusu, 2014. "Oil price fluctuation, volatility spillover and the Ghanaian equity market: Implication for portfolio management and hedging effectiveness," Energy Economics, Elsevier, vol. 42(C), pages 172-182.

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