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An Application Of Models Of Speculative Behaviour To Oil Prices

  • Shu-ping Shi

    ()

  • Vipin Arora

    ()

We estimate three different models of speculative behaviour using oil price data. There are two major results: (i) The three-regime model of Brooks and Katsaris (2005) and a three-regime variant of van Norden and Schaller (2002) fit the oil price data reasonably well; and (ii) Both models show that the probabilities of being in a bubble collapsing state and a bubble expansion state spike in late-2008/early-2009. This provides some support for the claim by Phillips and Yu (2010) and Gilbert (2010) that a bubble in oil prices existed for short period in 2008.

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Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2011-11.

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Length: 9 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:een:camaaa:2011-11
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  1. Huntley Schaller & Simon van Norden, 1997. "Fads or Bubbles?," Working Papers 97-2, Bank of Canada.
  2. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-88, October.
  3. Peter C. B. Phillips & Yangru Wu & Jun Yu, 2011. "EXPLOSIVE BEHAVIOR IN THE 1990s NASDAQ: WHEN DID EXUBERANCE ESCALATE ASSET VALUES?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 201-226, 02.
  4. Pindyck, Robert S, 1993. "The Present Value Model of Rational Commodity Pricing," Economic Journal, Royal Economic Society, vol. 103(418), pages 511-30, May.
  5. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
  6. Peter C. B. Phillips & Jun Yu, 2010. "Dating the Timeline of Financial Bubbles during the Subprime Crisis," Cowles Foundation Discussion Papers 1770, Cowles Foundation for Research in Economics, Yale University.
  7. Chris Brooks & Apostolos Katsaris, 2005. "A Three-Regime Model of Speculative Behaviour: Modelling the Evolution of the S&P 500 Composite Index," Economic Journal, Royal Economic Society, vol. 115(505), pages 767-797, 07.
  8. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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