Is WTI crude oil market becoming weakly efficient over time?: New evidence from multiscale analysis based on detrended fluctuation analysis
This paper extends the work in Tabak and Cajueiro [Are the crude oil markets becoming weakly efficient over time, Energy Economics 29 (2007) 28-36] and Alvarez-Ramirez et al. [Short-term predictability of crude oil markets: a detrended fluctuation analysis approach, Energy Economics 30 (2008) 2645-2656]. In this paper, we test for the efficiency of WTI crude oil market through observing the dynamic of local Hurst exponents employing the method of rolling window based on multiscale detrended fluctuation analysis. Empirical results show that short-term, medium-term and long-term behaviors were generally turning into efficient behavior over time. However, in this way, the results also show that the market did not evolve along stable conditions for long times. Multiscale analysis is also implemented based on multifractal detrended fluctuation analysis. We found that the small fluctuations of WTI crude oil market were persistent; however, the large fluctuations had high instability, both in the short- and long-terms. Our discussion is also extended by incorporating arguments from the crude oil market structure for explaining the different correlation dynamics.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dermot Gately & Hiliard G. Huntington, 2002. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 19-55.
- Podobnik, Boris & Fu, Dongfeng & Jagric, Timotej & Grosse, Ivo & Eugene Stanley, H., 2006. "Fractionally integrated process for transition economics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 362(2), pages 465-470.
- Elder, John & Serletis, Apostolos, 2008. "Long memory in energy futures prices," Review of Financial Economics, Elsevier, vol. 17(2), pages 146-155.
- Uritskaya, Olga Y. & Serletis, Apostolos, 2008. "Quantifying multiscale inefficiency in electricity markets," Energy Economics, Elsevier, vol. 30(6), pages 3109-3117, November.
- Alvarez-Ramirez, Jose & Alvarez, Jesus & Rodriguez, Eduardo & Fernandez-Anaya, Guillermo, 2008. "Time-varying Hurst exponent for US stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(24), pages 6159-6169.
- Serletis, Apostolos & Rosenberg, Aryeh Adam, 2007. "The Hurst exponent in energy futures prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 380(C), pages 325-332.
- Jiang, J. & Ma, K. & Cai, X., 2007. "Non-linear characteristics and long-range correlations in Asian stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 378(2), pages 399-407.
- James D. Hamilton, 2008.
"Understanding Crude Oil Prices,"
NBER Working Papers
14492, National Bureau of Economic Research, Inc.
- Brons, Martijn & Nijkamp, Peter & Pels, Eric & Rietveld, Piet, 2008. "A meta-analysis of the price elasticity of gasoline demand. A SUR approach," Energy Economics, Elsevier, vol. 30(5), pages 2105-2122, September.
- Alvarez-Ramirez, Jose & Cisneros, Myriam & Ibarra-Valdez, Carlos & Soriano, Angel, 2002. "Multifractal Hurst analysis of crude oil prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 313(3), pages 651-670.
- Kantelhardt, Jan W. & Zschiegner, Stephan A. & Koscielny-Bunde, Eva & Havlin, Shlomo & Bunde, Armin & Stanley, H.Eugene, 2002. "Multifractal detrended fluctuation analysis of nonstationary time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 316(1), pages 87-114.
- John C.B. Cooper, 2003. "Price elasticity of demand for crude oil: estimates for 23 countries," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 27(1), pages 1-8, 03.
- Tabak, Benjamin M. & Cajueiro, Daniel O., 2007. "Are the crude oil markets becoming weakly efficient over time? A test for time-varying long-range dependence in prices and volatility," Energy Economics, Elsevier, vol. 29(1), pages 28-36, January.
- Alvarez-Ramirez, Jose & Alvarez, Jesus & Rodriguez, Eduardo, 2008. "Short-term predictability of crude oil markets: A detrended fluctuation analysis approach," Energy Economics, Elsevier, vol. 30(5), pages 2645-2656, September.
- Serletis, Apostolos & Andreadis, Ioannis, 2004. "Random fractal structures in North American energy markets," Energy Economics, Elsevier, vol. 26(3), pages 389-399, May.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:32:y:2010:i:5:p:987-992. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.