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The efficiency of the crude oil markets: Evidence from variance ratio tests

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Author Info

  • Amélie Charles

    ()
    (Audencia Recherche - Audencia)

  • Olivier Darne

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)

Abstract

This study examines the random walk hypothesis for the crude oil markets, using daily data over the period 1982-2008. The weak-form efficient market hypothesis for two crude oil markets (UK Brent and US West Texas Intermediate) is tested with non-parametric variance ratio tests developed by [Wright J.H., 2000. Alternative variance-ratio tests using ranks and signs. Journal of Business and Economic Statistics, 18, 1-9] and [Belaire-Franch J. and Contreras D., 2004. Ranks and signs-based multiple variance ratio tests. Working paper, Department of Economic Analysis, University of Valencia] as well as the wild-bootstrap variance ratio tests suggested by [Kim, J.H., 2006. Wild bootstrapping variance ratio tests. Economics Letters, 92, 38-43]. We find that the Brent crude oil market is weak-form efficiency while the WTI crude oil market seems to be inefficiency on the 1994-2008 sub-period, suggesting that the deregulation have not improved the efficiency on the WTI crude oil market in the sense of making returns less predictable.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number hal-00771081.

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Date of creation: 2009
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Publication status: Published, Energy Policy, 2009, 37, 11, 4267-4272
Handle: RePEc:hal:journl:hal-00771081

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00771081
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Related research

Keywords: Crude oil markets; Market efficiency; Variance ratio test;

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References

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  1. Andrew W. Lo & A. Craig MacKinlay, 1988. "The Size and Power of the Variance Ratio Test in Finite Samples: A Monte Carlo Investigation," NBER Technical Working Papers 0066, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Ladislav Kristoufek & Miloslav Vosvrda, 2013. "Commodity futures and market efficiency," Papers 1309.1492, arXiv.org.
  2. Zhi-Qiang Jiang & Wen-Jie Xie & Wei-Xing Zhou, 2012. "Testing the weak-form efficiency of the WTI crude oil futures market," Papers 1211.4686, arXiv.org.
  3. Mohamed El Hedi Arouri & Duc Khuong Nguyen & Amine Lahiani, 2010. "Forecasting the conditional volatility of oil spot and futures prices with structural breaks and long memory models," Working Papers hal-00507831, HAL.
  4. Komijani, Akbar & Naderi, Esmaeil & Gandali Alikhani, Nadiya, 2013. "A Hybrid Approach for Forecasting of Oil Prices Volatility," MPRA Paper 44654, University Library of Munich, Germany.
  5. Montagnoli, Alberto & de Vries, Frans P., 2010. "Carbon trading thickness and market efficiency," Energy Economics, Elsevier, vol. 32(6), pages 1331-1336, November.
  6. Chen, Shyh-Wei & Lin, Shih-Mo, 2014. "Non-linear dynamics in international resource markets: Evidence from regime switching approach," Research in International Business and Finance, Elsevier, vol. 30(C), pages 233-247.
  7. Zhang, Bing & Li, Xiao-Ming & He, Fei, 2014. "Testing the evolution of crude oil market efficiency: Data have the conn," Energy Policy, Elsevier, vol. 68(C), pages 39-52.
  8. Martina, Esteban & Rodriguez, Eduardo & Escarela-Perez, Rafael & Alvarez-Ramirez, Jose, 2011. "Multiscale entropy analysis of crude oil price dynamics," Energy Economics, Elsevier, vol. 33(5), pages 936-947, September.
  9. Zhang, Bing, 2013. "Are the crude oil markets becoming more efficient over time? New evidence from a generalized spectral test," Energy Economics, Elsevier, vol. 40(C), pages 875-881.
  10. Mensi, Walid & Hammoudeh, Shawkat & Yoon, Seong-Min, 2014. "How do OPEC news and structural breaks impact returns and volatility in crude oil markets? Further evidence from a long memory process," Energy Economics, Elsevier, vol. 42(C), pages 343-354.
  11. Yudong Wang & Chongfeng Wu, 2013. "Efficiency of Crude Oil Futures Markets: New Evidence from Multifractal Detrending Moving Average Analysis," Computational Economics, Society for Computational Economics, vol. 42(4), pages 393-414, December.
  12. de, Vries Frans & Montagnoli, Alberto, 2009. "Carbon trading thickness and market efficiency: A non-parametric test," Stirling Economics Discussion Papers 2009-22, University of Stirling, Division of Economics.
  13. Alvarez-Ramirez, Jose & Alvarez, Jesus & Solis, Ricardo, 2010. "Crude oil market efficiency and modeling: Insights from the multiscaling autocorrelation pattern," Energy Economics, Elsevier, vol. 32(5), pages 993-1000, September.

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