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

  • Charles, Amélie
  • Darné, Olivier

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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Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 37 (2009)
Issue (Month): 11 (November)
Pages: 4267-4272

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Handle: RePEc:eee:enepol:v:37:y:2009:i:11:p:4267-4272
Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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  18. Kang, Sang Hoon & Kang, Sang-Mok & Yoon, Seong-Min, 2009. "Forecasting volatility of crude oil markets," Energy Economics, Elsevier, vol. 31(1), pages 119-125, January.
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