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A comprehensive segmentation analysis of crude oil market based on time irreversibility

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  • Xia, Jianan
  • Shang, Pengjian
  • Lu, Dan
  • Yin, Yi

Abstract

In this paper, we perform a comprehensive entropic segmentation analysis of crude oil future prices from 1983 to 2014 which used the Jensen–Shannon divergence as the statistical distance between segments, and analyze the results from original series S and series begin at 1986 (marked as S∗) to find common segments which have same boundaries. Then we apply time irreversibility analysis of each segment to divide all segments into two groups according to their asymmetry degree. Based on the temporal distribution of the common segments and high asymmetry segments, we figure out that these two types of segments appear alternately and do not overlap basically in daily group, while the common portions are also high asymmetry segments in weekly group. In addition, the temporal distribution of the common segments is fairly close to the time of crises, wars or other events, because the hit from severe events to oil price makes these common segments quite different from their adjacent segments. The common segments can be confirmed in daily group series, or weekly group series due to the large divergence between common segments and their neighbors. While the identification of high asymmetry segments is helpful to know the segments which are not affected badly by the events and can recover to steady states automatically. Finally, we rearrange the segments by merging the connected common segments or high asymmetry segments into a segment, and conjoin the connected segments which are neither common nor high asymmetric.

Suggested Citation

  • Xia, Jianan & Shang, Pengjian & Lu, Dan & Yin, Yi, 2016. "A comprehensive segmentation analysis of crude oil market based on time irreversibility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 450(C), pages 104-114.
    • Handle: RePEc:eee:phsmap:v:450:y:2016:i:c:p:104-114
    DOI: 10.1016/j.physa.2015.12.156
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    References listed on IDEAS

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    1. Rong, Lei & Shang, Pengjian, 2018. "New irreversibility measure and complexity analysis based on singular value decomposition," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 512(C), pages 913-924.
    2. Lahmiri, Salim, 2017. "A study on chaos in crude oil markets before and after 2008 international financial crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 466(C), pages 389-395.

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