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Auto-correlated behavior of WTI crude oil volatilities: A multiscale perspective

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  • Wang, Yudong
  • Wei, Yu
  • Wu, Chongfeng

Abstract

In this paper, we investigate the long-range auto-correlated behavior of WTI crude oil volatility series employing multifractal detrended fluctuation analysis. Our findings show that the for small time scales, the auto-correlations of volatilities were multifractal while for large time scales, the auto-correlations were nearly monofractal. Based on multiscale analysis, we also investigate the dynamics of auto-correlations for different intervals of time scales and find that several shocks could make significant effects on the auto-correlated behaviors for small time scales. Analyzing the dynamics of multifractality degrees of auto-correlations for small time scales, we find that the stronger auto-correlations were always related to the lower degrees of multifractality. At last, we have discussions on the determination factors of price behavior, the predictive implications of scaling behavior in volatilities for oil markets and the reasons why long-range auto-correlations of volatility were always strong for both small time scales and large time scales. Our results are very important theoretically and practically.

Suggested Citation

  • Wang, Yudong & Wei, Yu & Wu, Chongfeng, 2010. "Auto-correlated behavior of WTI crude oil volatilities: A multiscale perspective," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(24), pages 5759-5768.
    • Handle: RePEc:eee:phsmap:v:389:y:2010:i:24:p:5759-5768
    DOI: 10.1016/j.physa.2010.08.053
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