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Long memory in energy futures prices

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  • Elder, John
  • Serletis, Apostolos

Abstract

This paper extends the work in Serletis [Serletis, A. (1992). Unit root behavior in energy futures prices. The Energy Journal 13, 119-128] by re-examining the empirical evidence for random walk type behavior in energy futures prices. It tests for fractional integrating dynamics in energy futures markets utilizing more recent data (from January 3, 1994 to June 30, 2005) and a new semi-parametric wavelet-based estimator, which is superior to the more prevalent GPH estimator (on the basis of Monte-Carlo evidence). We find new evidence that energy prices display long memory and that the particular form of long memory is anti-persistence, characterized by the variance of each series being dominated by high frequency (low wavelet scale) components.

Suggested Citation

  • Elder, John & Serletis, Apostolos, 2008. "Long memory in energy futures prices," Review of Financial Economics, Elsevier, vol. 17(2), pages 146-155.
  • Handle: RePEc:eee:revfin:v:17:y:2008:i:2:p:146-155
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    References listed on IDEAS

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    1. Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188.
    2. Apostolos Serletis, 1992. "Unit Root Behavior in Energy Futures Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 119-128.
    3. Apostolos Serletis & Periklis Gogas, 2007. "The North American Natural Gas Liquids Markets are Chaotic," World Scientific Book Chapters,in: Quantitative And Empirical Analysis Of Energy Markets, chapter 17, pages 225-244 World Scientific Publishing Co. Pte. Ltd..
    4. Mark J. Jensen, 1997. "Using Wavelets to Obtain a Consistent Ordinary Least Squares Estimator of the Long Memory Parameter," Econometrics 9710002, University Library of Munich, Germany.
    5. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    6. William Barnett & Apostolos Serletis & Demitre Serletis, 2005. "Nonlinear and Complex Dynamics in Real Systems," GE, Growth, Math methods 0509002, University Library of Munich, Germany.
    7. Gary Gorton & K. Geert Rouwenhorst, 2004. "Facts and Fantasies about Commodity Futures," NBER Working Papers 10595, National Bureau of Economic Research, Inc.
    8. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    9. John Elder & Peter E. Kennedy, 2001. "Testing for Unit Roots: What Should Students Be Taught?," The Journal of Economic Education, Taylor & Francis Journals, vol. 32(2), pages 137-146, January.
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