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Testing for crude oil markets globalization during extreme price movements

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Author Info

  • Bertrand Candelon
  • Marc Joëts
  • Sessi Tokpavi

Abstract

This paper investigates the global crude oil market dependence during extreme price movements. To this aim we extend the univariate Granger causality test in extreme risk developed by Hong et al. (2009) in a multivariate context. Asymptotic as well as finite sample properties are delivered. Applying this test for 32 crude oil markets, it turns out that extreme price movements are governed by non-OPEC crude oil markets rather than OPEC ones. More precisely, WTI and Brent crude oils are price setters in both extreme downside and upside price movements. More surprisingly, Mediterranean Russian Urals and Europe Forcados (resp. Ecuador Oriente) rather than Dubai Fateh act as additional benchmarks in periods of extreme price falls (resp. rises). Moreover, the integration process between crude oil markets seems to decrease during extreme price movements making diversification strategies more feasible.

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Bibliographic Info

Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2012-28.

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Length: 35 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:drm:wpaper:2012-28

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Keywords: Crude oil markets; Risk transmission; Globalization; Distribution tails; Granger-causality test;

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References

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Cited by:
  1. Marc Joëts, 2013. "Energy price transmissions during extreme movements," Working Papers 2013-028, Department of Research, Ipag Business School.

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