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Comparative Analysis of Market Efficiency and Volatility of Energy Prices Before and During COVID-19 Pandemic Periods

Author

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  • Alaba, Oluwayemisi O.
  • Ojo, Oluwadare O.
  • Yaya, OlaOluwa S
  • Abu, Nurudeen
  • Ajobo, Saheed A.

Abstract

The Covid-19 pandemic has affected energy demand and pricing globally due to different lockdown measures embarked on by governments in different economies. As a result, prices of oil and petroleum products dropped drastically at the peak of the pandemic period. The present paper, therefore, investigates the effect of the pandemic on energy markets and compared the levels of market efficiency, volatility, and volatility persistence. Two 5-monthly daily data windows are considered, each for the period before and during the pandemic, and an updated nonlinear fractional integration approach in time series analysis is employed. Having considered prices of Crude oil, Gasoline, Diesel, Heating oil, Kerosene, and Propane from US markets, we find that energy markets are less efficient during the Covid-19 pandemic period, even though with higher volatility but with lesser volatility persistence compared to the period before the pandemic. Thus, volatility shocks last for a shorter period during the 5-month pandemic period than in the 5-month period that precedes the pandemic. It is hoped that the findings of this work will be of interest to oil marketers and administrators in the international oil markets.

Suggested Citation

  • Alaba, Oluwayemisi O. & Ojo, Oluwadare O. & Yaya, OlaOluwa S & Abu, Nurudeen & Ajobo, Saheed A., 2021. "Comparative Analysis of Market Efficiency and Volatility of Energy Prices Before and During COVID-19 Pandemic Periods," MPRA Paper 109825, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:109825
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    More about this item

    Keywords

    Energy price; Covid-19 pandemic; Efficient market; Volatility persistence; Fractional integration;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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