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Measuring price efficiency in petroleum markets: New insights using various long-range dependence techniques

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  • Tiwari, Aviral Kumar
  • Abakah, Emmanuel Joel Aikins
  • Mefteh-Wali, Salma
  • Owusu, Patrick

Abstract

This paper empirically measures pricing efficiency in the petroleum markets using a battery of long-range dependence techniques. We analyse the volatility (absolute returns) of fourteen petroleum products using daily prices from January 1990 to April 2020. We use bootstrapping techniques to estimate the confidence intervals of the long-range dependence parameters. Overall results obtained using CMA-MAF, CMA-MSF, GPH and periodogram techniques suggest that there is no evidence of long-range dependence in absolute returns of petroleum markets prices indices at least at the 10% level of significance. For robustness purposes, findings from the rolling windows estimates reveal that the results are not affected by the normality assumption under different rolling window sizes. Furthermore, we find that Gas oil, Biofuel and Heating oil are the most correctly priced while Crude Oil Dubai emerging is the least efficient. Comparing the efficiency index of the all six crude oil returns in our sample, WTI oil was seen to be less efficient than Brent crude oil. In all, our work uncovers crucial implications for investors and policymakers.

Suggested Citation

  • Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Mefteh-Wali, Salma & Owusu, Patrick, 2023. "Measuring price efficiency in petroleum markets: New insights using various long-range dependence techniques," Resources Policy, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:jrpoli:v:82:y:2023:i:c:s0301420723001381
    DOI: 10.1016/j.resourpol.2023.103430
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    More about this item

    Keywords

    Long-range persistence; Petroleum price efficiency; Petroleum markets;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools

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