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Time-varying Predictability in Crude Oil Markets: The Case of GCC Countries

  • Mohamed El Hedi Arouri

    ()

    (EconomiX - CNRS - UP10 - Université Paris 10, Paris Ouest Nanterre La Défense, LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - CNRS)

  • Duc Khuong Nguyen

    (CERAG - Centre d'études et de recherches appliquées à la gestion - Grenoble 2 UPMF - Université Pierre Mendès France - CNRS)

  • Thanh Huong Dinh

    (IRG - Institut de Recherche en Gestion - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - UPEM - Université Paris-Est Marne-la-Vallée)

This paper uses a time-varying parameter model with generalized autoregressive conditional heteros-cedasticity effects to examine the dynamic behavior of crude-oil prices for the period 1997-2008. Using data from four countries of the Gulf Cooperation Council, we find evidence of short-term pre-dictability in oil-price changes over time, except for several short sub-periods. However, the hypothe-sis of convergence towards weak-form informational efficiency is rejected for all markets. In addition, we explore the possibility of structural breaks in the time-paths of the estimated predictability indices and detect only one breakpoint, for the oil markets in Qatar and United Arab Emirates. Our empirical results therefore call for new empirical research to further gauge the predictability characteristics and the determinants of oil-price changes.

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Date of creation: 01 Aug 2010
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Handle: RePEc:hal:wpaper:hal-00507822
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