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Unit Root Properties of Crude Oil Spot and Futures Prices

Listed author(s):
  • Svetlana Maslyuk
  • Russell Smyth

In this paper we examine whether WTI and Brent crude oil spot and futures prices (at one, three and six months to maturity) contain a unit root with one and two structural breaks, employing weekly data over the period 1991-2004. To realize this objective we employ Lagrange Multiplier (LM) unit root tests with one and two endogenous structural breaks proposed by Lee and Stazicich (2003, 2004). We find that each of the oil price series can be characterized as a random walk process and that the endogenous structural breaks are significant and meaningful in terms of events that have impacted on world oil markets.

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File URL: http://www.buseco.monash.edu.au/eco/research/papers/2007/4007unitrootmaslyuksmyth.pdf
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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 40-07.

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Length: 30 pages
Date of creation: 2007
Handle: RePEc:mos:moswps:2007-40
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Department of Economics, Monash University, Victoria 3800, Australia

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