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Market efficiency in non-renewable resource markets: evidence from stationarity tests with structural changes

Author

Listed:
  • Alper Kara

    (Central Bank of the Republic of Turkey)

  • Dilem Yildirim

    (Middle East Technical University)

  • G. Ipek Tunc

    (Middle East Technical University)

Abstract

The dynamics of metal prices are highly significant for worldwide economic activity due to metals being key intermediate inputs to industrial production and construction and treated as investment assets. In that sense, this study investigates the efficient market hypothesis, i.e., predictability of price patterns, for several non-renewable resources, namely copper, lead, tin, nickel, zinc, aluminum, gold, platinum, and silver. Our period covers 1980Q1–2019Q4, during which metal markets witnessed many extraordinary times due to market-specific and global factors. Accounting for the importance of the potential breaks in the analysis of stochastic properties of non-renewable resource prices, we utilize two different stationarity tests; one is designed to capture smooth breaks, and the other one is designed to detect abrupt changes in the prices. Our empirical results reveal that none of the prices, except silver, can be characterized by the efficient market hypothesis. They follow stationary and predictable patterns with structural changes related to market-specific and global economic events, though concerns on economic uncertainties appeared to be more effective on precious metals.

Suggested Citation

  • Alper Kara & Dilem Yildirim & G. Ipek Tunc, 2023. "Market efficiency in non-renewable resource markets: evidence from stationarity tests with structural changes," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 36(2), pages 279-290, June.
    • Handle: RePEc:spr:minecn:v:36:y:2023:i:2:d:10.1007_s13563-022-00312-8
    DOI: 10.1007/s13563-022-00312-8
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    More about this item

    Keywords

    Long-run variance estimation; Market efficiency; Non-renewable resource price; Stationarity test; Structural change;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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