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Are oil and gas futures markets efficient? A multifractal analysis

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  • Zied Ftiti
  • Fredj Jawadi
  • Wael Louhichi
  • Mohamed El Arbi Madani

Abstract

Energy futures markets have shown high volatility, giving rise to challenges regarding their pricing and efficiency. This study investigates the weak-form efficiency hypothesis for two major energy futures markets (gas and oil) over both calm and crisis periods, using a multifractal approach and intraday data to deal with the flexible econometric framework and rich information. Our results are threefold. First, we show that multifractality in lower frequency might be more biased than in intraday data, which motivates the use of the fractal approach when testing the intraday efficiency. Second, we highlight that high frequency data are characterized by a true long memory with a higher degree of persistence during the post-crisis period for the oil market. However, for lower frequencies, the long memory becomes spurious for both markets. Finally, our forecasting results show that, for the oil market, the proposed multifractal approach outperforms conventional methodologies, especially during turmoil periods.

Suggested Citation

  • Zied Ftiti & Fredj Jawadi & Wael Louhichi & Mohamed El Arbi Madani, 2021. "Are oil and gas futures markets efficient? A multifractal analysis," Applied Economics, Taylor & Francis Journals, vol. 53(2), pages 164-184, January.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:2:p:164-184
    DOI: 10.1080/00036846.2020.1801984
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    Cited by:

    1. Faheem Aslam & Paulo Ferreira & Haider Ali & Ana Ercília José, 2022. "Application of Multifractal Analysis in Estimating the Reaction of Energy Markets to Geopolitical Acts and Threats," Sustainability, MDPI, vol. 14(10), pages 1-23, May.
    2. Clement Moyo & Izunna Anyikwa & Andrew Phiri, 2023. "The Impact of Covid-19 on Oil Market Returns: Has Market Efficiency Being Violated?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 118-127, January.
    3. Bariviera, Aurelio F. & Fabregat-Aibar, Laura & Sorrosal-Forradellas, Maria-Teresa, 2023. "Disentangling the impact of economic and health crises on financial markets," Research in International Business and Finance, Elsevier, vol. 65(C).
    4. Shrestha, Keshab & Naysary, Babak & Philip, Sheena Sara Suresh, 2023. "Fintech market efficiency: A multifractal detrended fluctuation analysis," Finance Research Letters, Elsevier, vol. 54(C).
    5. Fousekis, Panos & Tzaferi, Dimitra, 2022. "Price multifractality and informational efficiency in the futures markets of the US soybean complex," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 66, pages 68-84.
    6. Cao, Guangxi & Ling, Meijun, 2022. "Asymmetry and conduction direction of the interdependent structure between cryptocurrency and US dollar, renminbi, and gold markets," Chaos, Solitons & Fractals, Elsevier, vol. 155(C).

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