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Multifractal Hurst analysis of crude oil prices

Author

Listed:
  • Alvarez-Ramirez, Jose
  • Cisneros, Myriam
  • Ibarra-Valdez, Carlos
  • Soriano, Angel

Abstract

Daily records of international crude oil prices are studied using multifractal analysis methods. Rescaled range Hurst analysis provides evidence that the crude oil market is a persistent process with long-run memory effects. On the other hand, height–height correlation analysis reveals evidence of multifractal structures in the sense that the crude oil dynamics displays mixing of (rough) Hurst exponents. The existence of two characteristic time scales in the order of weeks and quarters is discovered and the corresponding prices dynamics are extracted using moving-average-based filtering. These results seem to demonstrate that the crude oil market is consistent with the random-walk assumption only at time scales of the order of days to weeks. A plausible oil price formation mechanism is discussed in terms of the market dynamics at three different time scales.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:phsmap:v:313:y:2002:i:3:p:651-670 DOI: 10.1016/S0378-4371(02)00985-8
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    References listed on IDEAS

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    1. Weron, Rafal & Przybyłowicz, Beata, 2000. "Hurst analysis of electricity price dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 283(3), pages 462-468.
    2. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters,in: THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78 World Scientific Publishing Co. Pte. Ltd..
    3. Black, Fischer, 1986. " Noise," Journal of Finance, American Finance Association, vol. 41(3), pages 529-543, July.
    4. Barabási, Albert-László & Szépfalusy, Péter & Vicsek, Tamás, 1991. "Multifractal spectra of multi-affine functions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 178(1), pages 17-28.
    5. Ausloos, M., 2000. "Statistical physics in foreign exchange currency and stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 285(1), pages 48-65.
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