quantile serial dependence in crude oil markets evidence from improved quantilogram analysis with quantile wild bootstrapping we examine the quantile serial dependence in crude oil prices based on the linton and whang s quantile based portmanteau test which we improved by means of quantile wild bootstrapping qwb through monte carlo simulation we find that the quantile wild bootstrap based portmanteau test performs better than the bound testing procedure suggested by linton and whang we apply the improved test to examine the efficiency of two crude oil markets wti and brent we also examine if the dependence is stable via rolling sample tests our results show that both wti and brent are serially dependent in all except the median quantiles these findings suggest that it may be misleading to examine the efficiency of crude oil markets in terms of mean or median returns only these crude oil markets are relatively more serially dependent in non median ranges

to float or to fix evidence on the impact of exchange rate regimes on growth we study the relationship between exchange rate regimes and economic growth for a sample of 183 countries over the post bretton woods period using a new de facto classification of regimes based on the actual behavior of the relevant macroeconomic variables in contrast with previous studies we find that for developing countries less flexible exchange rate regimes are associated with slower growth as well as with greater output volatility for industrial countries regimes do not appear to have any significant impact on growth the results are robust to endogeneity corrections and a number of alternative specifications borrowed from the growth literature

automate the identification of technical patterns a k nearest neighbour model approach to explore profitable patterns in historical stock prices ordinarily a promising pattern is selected by rule of thumb and then its performance is verified by comparing the conditional return of t

explaining business cycles in small open economies abstract this paper analyzes the role of world price shocks fluctuations in the prices of capital intermediate and primary goods and in the world real interest rate in the generation and propagation of business cycles in small open developing countries i construct a stochastic dynamic multi sector small open economy model the model is a variant of the specific factors model and reflects the major structural characteristics of developing economies i utilize variance decomposition methods to quantitatively evaluate the impact of world price shocks the results indicate that world price shocks account for a significant fraction of business cycle variability in developing countries

china s oil use 1990 2008 abstract over the past two decades china s oil demand has risen steeply in 1990 it was only about 25 higher than that of 1978 the year economic reform was introduced by 2008 it had reached 396 0 million tons roughly four times the 1978 level making china the second largest oil user worldwide the country became a net oil importer in 1993 and between 1993 and 2008 its net import dependency a yardstick for energy security soared from 7 5 to 50 0 china s increased demand for oil has made the country a global energy player of critical importance although the literature on the global implications of china s oil use has proliferated relatively few studies have attempted to examine how china uses oil hence this study covers every oil consuming facility and sector in china exploring the patterns of and factors involved in oil demand by power plants oil refineries heat plants and gas works and industrial transport agricultural household and commercial sectors it concludes that in virtually all sectors in china oil demand will grow with transport and industry leading the way

chaos in oil prices evidence from futures markets abstract we test for the presence of low dimensional chaotic structure in crude oil heating oil and unleaded gasoline futures prices from the early 1980s evidence on chaos will have important implications for regulators and short term trading strategies while we find strong evidence of non linear dependencies the evidence is not consistent with chaos our test results indicate that arch type processes with controls for seasonal variation in prices generally explain the non linearities in the data we also demonstrate that employing seasonally adjusted price series contributes to obtaining robust results via the existing tests for chaotic structure maximum likelihood methodologies that are robust to the non linear dynamics lend support for samuelson s hypothesis on contract maturity effects in futures price changes however the tests for chaos are not found to be sensitive to the maturity effects in the futures contracts the results are robust to controls for the oil shocks of 1986 and 1991

one security many markets determining the contributions to price discovery when homogeneous or closely linked securities trade in multiple markets it is often of interest to determine where price discovery the incorporation of new information occurs this article suggests an econometric approach based on an implicit unobservable efficient price common to all markets the information share associated with a particular market is defined as the proportional contribution of that market s innovations to the innovation in the common efficient price applied to quotes for the thirty dow stocks the technique suggests that the preponderance of the price discovery takes place at the new york stock exchange nyse a median 92 7 percent information share although most of the classic paradigms in market microstructure concern a security that trades in a single centralized market such situations are becoming increasingly rare in practice fragmentation the dispersal of trading in a security to multiple sites has emerged as a dominant institutional trend this process is of concern to financial economists and regulators because price information and price discovery the impounding of new information into the security price arguably the most important products of a security market have many attributes of public goods as the process of fragmentation accelerates it may be important to determine where the price information and price discovery are being produced 1 this paper suggests a practical econometric approach to this problem the technique is illustrated with an application to u s equity markets many stocks listed on the new york stock exchange nyse trade concurrently on the regional exchanges and the national association of securities dealers national market system nasd nms since a share of ibm stock is the same security whether purchased on the midwest or pacific exchange this is a particularly clear instance of multiple markets nevertheless the expres

how the heterogeneity in investment horizons affects market trends abstractto investigate the relationship between the liquidity and the divergent degree of heterogeneous investors with different investment horizons we propose an agent based model based on the assumptions of the fractal market hypothesis a laboratory market is used to investigate the impact of the divergent degree on the stability of the financial market simulation results indicate that the market becomes more stable as investors become increasingly divergent and are more likely to absorb the orders of the other side and maintain a narrow trade gap moreover with highly heterogeneous investors the market is more efficient less liable to crash and less volatile the simulation based on the agent based model demonstrates that the interactions and herding behaviours of investors lead to a market crash when the divergent structure shrinks and only limited investment horizons are available the result also suggests an alternate explanation of the anomaly of efficient market hypothesis which shows why

is wti crude oil market becoming weakly efficient over time new evidence from multiscale analysis based on detrended fluctuation analysis abstract this paper extends the work in tabak and cajueiro are the crude oil markets becoming weakly efficient over time energy economics 29 2007 28 36 and alvarez ramirez et al short term predictability of crude oil markets a detrended fluctuation analysis approach energy economics 30 2008 2645 2656 in this paper we test for the efficiency of wti crude oil market through observing the dynamic of local hurst exponents employing the method of rolling window based on multiscale detrended fluctuation analysis empirical results show that short term medium term and long term behaviors were generally turning into efficient behavior over time however in this way the results also show that the market did not evolve along stable conditions for long times multiscale analysis is also implemented based on multifractal detrended fluctuation analysis we found that the small fluctuations of wti crude oil market were persistent however the large fluctuations had high instability both in the short and long terms our discussion is also extended by incorporating arguments from the crude oil market structure for explaining the different correlation dynamics

trading and pricing in upstairs and downstairs stock markets we provide empirical evidence on the economic benefits of negotiating trades in the upstairs trading room of brokerage firms relative to the downstairs market using helsinki stock exchange data we find that upstairs trades tend to have lower information content and lower price impacts than downstairs trades this is consistent with the hypotheses that the upstairs market is better at pricing uninformed liquidity trades and that upstairs brokers can give better prices to their customers if they know the unexpressed demands of other customers we find that these economic benefits depend on price discovery occurring in the downstairs market copyright 2002 oxford university press

are there exploitable inefficiencies in the futures market for oil if the crude oil futures market is not efficient in the fama sense profitable trading opportunities may exist this paper uses an artificial neural network model with moving average crossover inputs to predict price in the crude oil futures market the predictions of price are used to construct buy and sell signals for traders compared to those of benchmark models cumulative returns year to year returns returns over a market cycle and sharpe ratios all favor the ann model by a large factor the significant profitability of the ann model casts doubt on the efficiency of the oil futures market

asean income gap and the optimal exchange rate regime this article investigates the optimal exchange rate regime in a group of asean countries which minimizes the adverse effects of foreign demand shocks on real output the real exchange rate price

the relationship between regional natural gas markets and crude oil markets from a multi scale nonlinear granger causality perspective this study first decomposes the daily returns of regional gas and crude oil at different time scales using the ensemble empirical mode decomposition eemd method it then investigates the causality relationship between each pair of components at the different time scales by employing the linear and nonlinear granger causality tests for the original returns series this study finds that unidirectional linear granger causality exists from crude oil markets to north american and european gas markets however for nonlinear characteristics the crude oil and regional gas markets exhibit bidirectional nonlinear granger causality on the medium term time scale a bidirectional nonlinear spillover effect is found between the markets the long term trends for the markets suggest a significant linear relationship however no nonlinear spillover effect is found between the crude oil and regional gas markets

does opec influence crude oil prices testing for co movements and causality between regional crude oil prices using high frequency data the co movements among crude oil prices are analysed in order to address the question of regionalization of the world crude oil market time series econometrics in the form of error correction modelling is applied for daily crude oil price data covering the time period 1988 to 2004 and in this framework topics like weak and strong exogeneity among three major oil prices represented by brent opec and texas wti are addressed the empirical results are that causality is most likely bi directional among these crude oil prices and hence rejecting a regionalization hypothesis of the global oil market and also an influence from the opec oil price towards bent and wti which are usually claimed to have a benchmark role

nominal price rigidity money supply endogeneity and business cycles abstract this paper investigates the ability of nominal price rigidity to explain the co movement of inflation with the cyclical component of output observed in the post war u s data a dynamic general equilibrium model is constructed with the introduction of monopolistic competition and nominal price rigidity in a standard real business cycle model allowing for an endogenous money supply rule it is then demonstrated that sticky price models can explain the observed associations between movements in inflation and output much better than flexible price models this result depends little on whether money supply is assumed to be endogenous or not

options in the real world lessons learned in evaluating oil and gas investments many firms in the oil and gas business have long used decision analysis techniques to evaluate exploration and development opportunities and have looked at recent development in option pricing theory as potentially offering improvements over the decision analysis approach unfortunately it is difficult to discern the benefits of the options approach from the literature on the topic most of the published examples greatly oversimplify the kinds of projects encountered in practice and comparisons are typically made to traditional discounted cash flow analysis which unlike the option pricing and decision analytic approaches does not explicitly consider the uncertainty in project cash flows in this paper we provide a tutorial introduction to option pricing methods focusing on how they relate to and can be integrated with decision analysis methods and describe some lessons learned in using these methods to evaluate some real oil and gas investments

a new way of measuring the wti brent spread globalization shock persistence and common trends abstract the standard cointegration and the persistence of the spread of the brent wti price have been widely analyzed however no studies have been able to present evidence of both issues jointly so far a novel focus is presented in this paper from the application of the fractionally cointegrated vector autoregressive fcvar approach which allows the rigidity of the standard cointegration to be solved as result of the application of the fcvar model we identify several degrees of globalization by analyzing the order of integration of the error correction term indeed by using permanent transitory decomposition analysis we present what drives the relationship between both oil crude prices information the findings shown here reveal that the brent wti market is strongly globalized nevertheless the brent wti price spread follows a long memory process and the brent drives the brent wti price structure these results sustain some corollaries on economic policies for economic agents policy makers and business operators

new directions for stochastic open economy models the paper develops a simple stochastic new open economy macroeconomic model based on sticky nominal wages explicit solution of the wage setting problem under uncertainty allows one to analyze the effects of the monetary regime on welfare expected output and the expected terms of trade despite the potential interplay between imperfections due to sticky wages and monopoly the optimal monetary policy rule has a closed form solution to motivate our model we show that observed correlations between terms of trade and exchange rates are more consistent with our traditional assumptions about nominal rigidities than with a popular alternative based on local currency pricing 2000 elsevier science b v all rights reserved

trends and contagion in wti and brent crude oil spot and futures markets the role of opec in the last decade abstract this article examines the interconnectedness of wti and brent prices on different resolutions of price movements firstly within a multivariate bekk framework we identify high but volatile correlations with recurring highs around 0 8 and multiple periods of decoupling opec meetings increase the correlation in the short run secondly linear l1 trends reveal that long term movements of wti and brent are driven by the same dynamics confirming the one great pool hypothesis opec meetings have only little impact on long term price trends thirdly we find leading effects of wti over brent by short term trends of several days especially in a negative direction these trends have an asymmetrical effect on volatility negative trends cause a stronger increase than positive trends these findings are of interest to policy makers as well as hedging strategies of crude oil portfolios and provide insight into long term movements of crude prices

price discovery in crude oil futures this study examines price discovery among the two most prominent price benchmarks in the market for crude oil wti sweet crude and brent sweet crude using data on the most active futures contracts measured at the one second frequency we nd that wti maintains a dominant role in price discovery relative to brent with an estimated information share in excess of 80 over a sample from 2007 through 2012 our analysis is robust

deutsche mark dollar volatility intraday activity patterns macroeconomic announcements and longer run dependencies this paper provides a detailed characterization of the volatility in the deutsche mark dollar foreign exchange market using an annual sample of five minute returns the approach captures the intraday activity patterns the macroeconomic announcements and the volatility persistence arch known from daily returns the different features are separately quantified and shown to account for a substantial fraction of return variability both at the intraday and daily level the implications of the results for the interpretation of the fundamental driving forces behind the volatility process is also discussed the efficient market hypothesis contends that financial asset prices provide rational assessments of fundamental values and future payoffs by implication price changes should reflect the arrival and processing of all relevant new information however the proportion of return variability that can be ascribed to public news announcements is low for example cutler poterba and summers 1989 find that even the largest daily price changes in the stock market generally cannot be associated with any significant economic news 1 moreover proxies for the flow of public information e g the number of news items released by reuter s news service berry and hiowe 1994 or dow jones company mitchell and mulherin 1994 explain little of the overall variation thus if private information is ruled out proponents of rational price formation have to assert the existence of important news items

short term variations and long term dynamics in commodity prices in this article we develop a two factor model of commodity prices that allows meanreversion in short term prices and uncertainty in the equilibrium level to which prices revert although these two factors are not directly observable they may be estimated from spot and futures prices intuitively movements in prices for long maturity futures contracts provide information about the equilibrium price level and differences between the prices for the short and long term contracts provide information about short term variations in prices we show that although this model does not explicitly consider changes in convenience yields over time this short term long term model is equivalent to the stochastic convenience yield model developed in gibson and schwartz 1990 we estimate the parameters of the model using prices for oil futures contracts and apply the model to some hypothetical oil linked assets to demonstrate its use and some of its advantages over the gibson schwartz model

the efficiency of the crude oil markets evidence from variance ratio tests this study examines the random walk hypothesis for the crude oil markets using daily data over the period 1982 2008 the weak form efficient market hypothesis for two crude oil markets uk brent and us west texas intermediate is tested with non parametric variance ratio tests developed by wright j h 2000 alternative variance ratio tests using ranks and signs journal of business and economic statistics 18 1 9 and belaire franch j and contreras d 2004 ranks and signs based multiple variance ratio tests working paper department of economic analysis university of valencia as well as the wild bootstrap variance ratio tests suggested by kim j h 2006 wild bootstrapping variance ratio tests economics letters 92 38 43 we find that the brent crude oil market is weak form efficiency while the wti crude oil market seems to be inefficiency on the 1994 2008 sub period suggesting that the deregulation have not improved the efficiency on the wti crude oil market in the sense of making returns less predictable

predictability of price movements in deregulated electricity markets abstract in this paper we investigate predictability of electricity prices in the canadian provinces of alberta and ontario as well as in the us mid c market using scale dependent detrended fluctuation analysis spectral analysis and the probability distribution analysis we show that the studied markets exhibit strongly anti persistent properties suggesting that their dynamics can be predicted based on historic price records across the range of time scales from 1 h to one month for both canadian markets the price movements reveal three types of correlated behavior which can be used for forecasting the discovered scenarios remain the same on different time scales up to one month as well as for on and off peak electricity data these scenarios represent sharp increases of prices and are not present in the mid c market due to its lower volatility we argue that extreme price movements in this market should follow the same tendency as the more volatile canadian markets the estimated values of the pareto indices suggest that the prediction of these events can be statistically stable the results obtained provide new relevant information for managing financial risks associated with the dynamics of electricity derivatives over time frame exceeding one day

on the short and long run efficiency of energy and precious metal markets this article contributes to the related literature by empirically investigating the efficiency of nine energy and precious metal markets over the last decades employing several pronounced models we test for both short and the long run efficiency using in addition to linear cointegration models nonlinear cointegration and error correction models ecms which allow the efficiency intensity to change per regime our findings can be summarized as follows i futures prices are found to be cointegrated with spot prices but they do not constitute unbiased predictors of future spot prices ii the hypothesis of risk neutrality is rejected iii the short run efficiency hypothesis is rejected suggesting that using past futures price returns improves the modeling and forecasting of future spot prices and iv the nonlinear modeling suggests the presence of two distinct regimes wherein the first regime the efficiency hypothesis is supported whereas in the second it is rejected the empirical findings have important implications for producers hedgers speculators and policymakers

terms of trade and exchange rate regimes in developing countries abstract since friedman essays in positive economics university of chicago press chicago 1953 157 203 an advantage often attributed to flexible exchange rate regimes over fixed regimes is their ability to insulate more effectively the economy against real shocks i use a post bretton woods sample 1973 96 of 75 developing countries to assess whether the responses of real gdp real exchange rates and prices to terms of trade shocks differ systematically across exchange rate regimes i find that responses are significantly different across regimes in a way that supports friedman s hypothesis the paper also examines the importance of terms of trade shocks in explaining the overall variance of output and prices in developing countries

long term memories of developed and emerging markets using the scaling analysis to characterize their stage of development the scaling properties encompass in a simple analysis many of the volatility characteristics of financial markets that is why we use them to probe the different degree of markets development we empirically study the scaling properties of daily foreign exchange rates stock market indices and fixed income instruments by using the generalized hurst approach we show that the scaling exponents are associated with characteristics of the specific markets and can be used to differentiate markets in their stage of development the robustness of the results is tested by both monte carlo studies and a computation of the scaling in the frequency domain

scaling in economics a reader s guide this paper discusses examples of scaling laws in economics and finance it argues that these regularities in data are useful for disciplining theory formation estimation of the conditional predictive distribution and estimation of impulse response functions is a main goal of econometric work scaling type regularities give useful information on the underlying data generating process the ability of scaling laws to suggest lines of potentially fruitful research was illustrated by the suggestion of several speculative research projects in this paper most importantly the paper stresses the challenges that face empirical and theoretical researchers who wish to make use of scaling law type regularities to improve econometric identification of the underlying causal data generating mechanism copyright 1999 by oxford university press

jump dynamics with structural breaks for crude oil prices this study investigates the joint phenomena of permanent and transitory components in conditional variance and jump intensity along with verification of structural breaks for crude oil prices we adopt a component arji model with structural break analysis utilizing daily data on west texas intermediate crude oil spot and futures contracts the analytical results verify the existence of permanent and transitory components in conditional variance with the permanent component of conditional variance increasing with the occurrence of a sudden major event such as the iraqi invasion of kuwait operation desert storm and the war between the us and iraq and a relatively greater increase in the transitory component over the same period notably jump intensity fluctuates with an increase in the transitory component of conditional variance in response to abnormal events it is the transitory component which serves as the primary influential factor for jumps in returns therefore speculators are willing to take large risks particularly with respect to anticipating future price movements or gambling in the hopes of rapidly making substantial gains thus speculators prefer the temporary volatility component and engage in trade activities however investors prefer the permanent volatility component because they may well be better off relocating their assets into more stable portfolios to outperform the market portfolio over the long run

is efficiency of crude oil market affected by multifractality evidence from the wti crude oil market in this paper we investigate the dynamics of relationship between efficiency and multifractality of wti crude oil market based on the cross correlation analysis and the nonlinear granger causality analysis we find that the inefficiency and multifractality of the wti crude oil returns interact positively in a nonlinear mechanism this suggests that the increase of multifractality degree will lead to the lower degree of market efficiency and vice versa our findings have some important implications for oil price forecasting and portfolio management

quantifying multiscale inefficiency in electricity markets one of the basic features of efficient markets is the absence of correlations between price increments over any time scale leading to random walk type behavior of prices in this paper we propose a new approach for measuring deviations from the efficient market state based on an analysis of scale dependent fractal exponent characterizing correlations at different time scales the approach is applied to two electricity markets alberta and mid columbia mid c as well as to the aeco alberta natural gas market for purposes of providing a comparison between storable and non storable commodities we show that price fluctuations in all studied markets are not efficient with electricity prices exhibiting complex multiscale correlated behavior not captured by monofractal methods used in previous studies

price discount inventories and the distortion of wti benchmark abstract applying a rolling estimation to the hasbrouck information share model this study investigates the changing status of wti benchmark over time results show the ability of wti in reflecting market conditions decreases sharply and wti s efficiency in processing information has been surpassed by brent s since the second half of 2004 in the short run the wti distortion is related to its price discount problem but the distortion cannot be indicated by contangos in the long run wti s price discount problem coexists with a positive forward curve and both have harmed the price discovery role of wti the rising inventories in cushing significantly deteriorate wti s ability in serving as a world benchmark

statistical study of foreign exchange rates empirical evidence of a price change scaling law and intraday analysis abstract in this paper we present a statistical analysis of four foreign exchange spot rates against the u s dollar with several million intra day prices over 3 years the analysis also includes gold prices and samples of daily foreign exchange prices over 15 years the mean absolute changes of logarithmic prices are found to follow a scaling law against the time interval on which they are measured this empirical law holds although the distributions of the price changes strongly differ for different interval sizes systematic variations of the volatility are found even during business hours by an intra day analysis of price changes seasonal heteroskedasticity is observed with a period of one day as well as one week as the result of an analogous intra week analysis taking this into account is necessary for any future study of intra day price change distributions and their generating process the same type of analysis is also made for the bid ask spreads

are the crude oil markets becoming weakly efficient over time a test for time varying long range dependence in prices and volatility this paper analyzes the efficiency of crude oil markets brent and west texas intermediate by means of estimating the fractal structure of these time series we test for time varying degrees of long range dependence using the rescaled range hurst analysis and find evidence that this market has become more efficient over time these results are robust for controlling for short term autocorrelation by means of a shuffling procedure

crude oil market efficiency and modeling insights from the multiscaling autocorrelation pattern abstract empirical research on market inefficiencies focuses on the detection of autocorrelations in price time series in the case of crude oil markets statistical support is claimed for weak efficiency over a wide range of time scales however the results are still controversial since theoretical arguments point to deviations from efficiency as prices tend to revert towards an equilibrium path this paper studies the efficiency of crude oil markets by using lagged detrended fluctuation analysis dfa to detect delay effects in price autocorrelations quantified in terms of a multiscaling hurst exponent i e autocorrelations are dependent of the time scale results based on spot price data for the period 1986 2009 indicate important deviations from efficiency associated to lagged autocorrelations so imposing the random walk for crude oil prices has pronounced costs for forecasting evidences in favor of price reversion to a continuously evolving mean underscores the importance of adequately incorporating delay effects and multiscaling behavior in the modeling of crude oil price dynamics

the effect of uncertainty and aggregate investments on crude oil price dynamics this paper is a study of the dynamics of the oil industry and we derive a mean reverting process for the crude oil price oil is supplied by a market leader opec and by an aggregate that represents non opec producers the non opec producers take the oil price as given the cost of non opec producers depends on past investments shifts in these investments are influenced by costs of structural change in the construction industry a drop in the oil price to below a given level triggers lower investments but if the oil price reverts back to a high level investments may not immediately expand in an uncertain oil demand environment cost of structural change creates a value of waiting to invest this investment behaviour influences the oil price process

exogenous shocks and exchange rate regimes using a dynamic stochastic general equilibrium dsge model with nominal price rigidity and imperfect competition we examine the impact of terms of trade and foreign interest rate shocks on some key macroeconomic variables for a small open economy under different exchange rate regimes numerical solutions from the model are found consistent with empirical panel var results of 33 asian economies for the period of 1980 2009 from both the theoretical model and empirical evidence we find that i output responses to terms of trade and foreign interest rate shocks are smoother in floats ii price responses to terms of trade shocks are smoother in floats than in pegs while its responses to foreign interest shocks are more volatile in floats than in pegs and iii the effects of terms of trade and foreign interest shocks are more prolonged under floats

exchange rate systems and macroeconomic stability abstract we examine macroeconomic stability and the properties of the international transmission of business cycles under three exchange rate systems a flexible a unilateral peg ems and a single currency emu the subjects of study are germany and france in france macroeconomic volatility under emu is comparable to that under a flexible exchange rate system but considerably lower than that under ems in germany output volatility is significantly higher under ems relative to the flexible regime and increases even further under emu inflation though becomes more stable emu also induces a strong negative international transmission of country specific supply shocks and amplifies their role this fact may complicate ecb policymaking

testing for linear and nonlinear granger causality in the stock price volume relation linear and nonlinear granger causality tests are used to examine the dynamic relation between daily dow jones stock returns and percentage changes in new york stock exchange trading volume we find evidence of significant bidirectional nonlinear causality between returns and volume we also examine whether the nonlinear causality from volume to returns can be explained by volume serving as a proxy for information flow in the stochastic process generating stock return variance as suggested by clark s 1973 latent common factor model after controlling for volatility persistence in returns we continue to find evidence of nonlinear causality from volume to returns

a new statistic and practical guidelines for nonparametric granger causality testing abstract in this paper we introduce a new nonparametric test for granger non causality which avoids the over rejection observed in the frequently used test proposed by hiemstra and jones 1994 testing for linear and nonlinear granger causality in the stock price volume relation journal of finance 49 1639 1664 after illustrating the problem by showing that rejection probabilities under the null hypothesis may tend to one as the sample size increases we study the reason behind this phenomenon analytically it turns out that the hiemstra jones test for the null of granger non causality which can be rephrased in terms of conditional independence of two vectors x and z given a third vector y is sensitive to variations in the conditional distributions of x and z that may be present under the null to overcome this problem we replace the global test statistic by an average of local conditional dependence measures by letting the bandwidth tend to zero at appropriate rates the variations in the conditional distributions are accounted for automatically based on asymptotic theory we formulate practical guidelines for choosing the bandwidth depending on the sample size we conclude with an application to historical returns and trading volumes of the standard and poor s index which indicates that the evidence for volume granger causing returns is weaker than suggested by the hiemstra jones test

disentangling the determinants of real oil prices in this study we quantify the impacts of economic fundamentals and derivative market speculation on the real price of crude oil using a structural var with sign restriction we determine that oil demand from the us and china particularly the latter one plays a crucial role in oil price changes after the year 2000 the contribution of speculation does not exceed 10 of oil price variations in our sample period

business cycles and the exchange rate system some international evidence this paper investigates the differences in time series behavior of key economic aggregates under alternative exchange rate systems we use a postwar sample of 49 countries to compare the behavior of output consumption trade flows government consumption spending and real exchange rates under alternative exchange rate systems pegged floating and cooperative systems such as the ems we then examine evidence from two particular episodes involving canada and ireland of changes in the exchange rate system aside from greater variability of real exchange rates under flexible than under pegged nominal exchange rate systems we find little evidence of systematic differences in the behavior of macroeconomic aggregates or international trade flows under alternative exchange rate systems these results are of interest because a large class of theoretical models implies that the nominal exchange rate system has important effects on a number of macroeconomic quantities

multiscale entropy analysis of crude oil price dynamics abstract price formation in crude oil markets is the result of the action of many participants e g producers governments speculators etc whose effects are perceived at different time scales from days to years the diversity of participants as well as the occurrence of extreme socio political events yields a market with complex price evolution this paper uses entropy methods to monitor the evolution of crude oil price movements as the complexity of the price can depend of the time horizon entropy computations are performed for different time scales via low pass filtering of the price difference dynamics the results are interpreted in term of relative market efficiency concepts in the sense that high entropy values should be related to a more complex and hence less predictable market evolution it is shown that the highest market efficiency is found for small time scales up to one or two weeks the multiscale entropy pattern for high time scales longer than one quarter is interesting as it shows alternating periods of high and low entropy levels interestingly this alternating pattern has a dominant spectral component of about 4 3 years which could be related to macroeconomic kitchin business cycles it is shown that u s recessions in the recent 25 years are coincident with periods of reduced entropy levels meaning that during economic downturn the long run market complexity is drastically reduced the possible effects of extreme events e g iraq war are analyzed in terms of the relative market efficiency suggesting that some events have affected the short term but not the long term market complexity overall these results show that methods based on entropy concepts can shed light on the structure of crude oil markets as well as on its link to macroeconomic conditions and socio political extreme events

economic growth and energy consumption revisited evidence from linear and nonlinear granger causality the relationship between energy consumption and economic growth is considered as an imperative issue in energy economics previous studies have ignored the nonlinear behavior which could be caused by structural breaks in this study both linear and nonlinear granger causality tests are applied to examine the causal relationship between energy consumption and economic growth for a sample of asian newly industrialized countries as well as the u s this study finds evidence supporting a neutrality hypothesis for the united states thailand and south korea however empirical evidence on philippines and singapore reveals a unidirectional causality running from economic growth to energy consumption while energy consumption may have affected economic growth for taiwan hong kong malaysia and indonesia policy implications are also discussed

the dynamics of exchange rate regimes fixes floats and flips the impermanence of fixed exchange rates has become a stylized fact in international finance the combination of the mirage view that pegs do not really peg with the fear of floating view that floats do not really float generates the conclusion that exchange rate regimes are in practice unimportant for the behavior of the exchange rate this is consistent with evidence on the irrelevance of exchange rate regimes for general macroeconomic performance recent studies however show that the exchange rate regime matters this can be understood by considering the dynamics of exchange rate regimes we demonstrate that the mirage view is somewhat misleading and incomplete pegs frequently break but many do last also there is a high degree of flipping that is the re formation of pegs that have broken thus a fixed exchange rate today is a good predictor that one will exist in the future we also investigate the quantitative effect of fixed exchange rates while the fear of floating view suggests little actual difference in fixed and floating rates with respect to exchange rate volatility we show that fixed exchange rates exhibit considerably greater bilateral exchange rate stability than flexible rates both today and in the future 2007 elsevier b v all rights reserved

a meta analysis of the price elasticity of gasoline demand a sur approach abstract automobile gasoline demand can be expressed as a multiplicative function of fuel efficiency mileage per car and car ownership this implies a linear relationship between the price elasticity of total fuel demand and the price elasticities of fuel efficiency mileage per car and car ownership in this meta analytical study we aim to investigate and explain the variation in empirical estimates of the price elasticity of gasoline demand a methodological novelty is that we use the linear relationship between the elasticities to develop a meta analytical estimation approach based on a seemingly unrelated regression sur model with cross equation restrictions this approach enables us to combine observations of different elasticities and thus increase our sample size furthermore it allows for a more detailed interpretation of our meta regression results the empirical results of the study demonstrate that the sur approach leads to more precise results i e lower standard errors than a standard meta analytical approach we find that with mean short run and long run price elasticities of 0 34 and 0 84 respectively the demand for gasoline is not very price sensitive both in the short and the long run the impact of a change in the gasoline price on demand is mainly driven by responses in fuel efficiency and mileage per car and to a slightly lesser degree by changes in car ownership furthermore we find that study characteristics relating to the geographic area studied the year of the study the type of data used the time horizon and the functional specification of the demand equation have a significant impact on the estimated value of the price elasticity of gasoline demand

trading on mean reversion in energy futures markets abstract we study whether simple technical trading strategies enjoying large popularity among practitioners can be employed profitably in the context of hedge portfolios for crude oil natural gas gasoline and heating oil futures the strategies tested are based on mean reverting calendar spread portfolios established with dynamic hedge ratios entry and exit signals are generated by so called bollinger bands the trading system is applied to twenty two years of historical data from 1992 to 2013 for various specifications taking transaction costs into account the significance of the results is evaluated with a bootstrap test in which randomly generated orders are compared to orders placed by the trading system whereas we find most combinations involving the front month and second month futures to be significantly profitable for all commodities tested the best results for the risk adjusted sharpe ratio are obtained for wti crude oil and natural gas with sharpe ratios in excess of 2 for most combinations and a rather smooth performance for all calendar spreads based on our results there is a serious doubt whether energy futures markets can be considered weakly efficient in the short term

are the crude oil markets really becoming more efficient over time some new evidence abstract we replicate the study of tabak cajueiro 2007 are the crude oil markets becoming weakly efficient over time a test for time varying long range dependence in prices and volatility published in energy economics 29 pp 28 36 the results have been mostly confirmed specifically we have confirmed that the crude oil markets efficiency could be rejected up till approximately 1994 and this holds for both studied crude oil commodities brent and wti analyzing an extended dataset up till june 2017 we find that the markets remained efficient at least with respect to long range dependence until the outbreak of the global financial crisis in 2008 this is confirmed by all three applied methods the rescaled range analysis used in the original study and the detrended fluctuation analysis and the geweke porter hudak estimator which were added to strengthen validity of the results the markets returned back to efficiency around 2012 and remained there until 2015 when the hurst exponent started another rally and stayed rather high until the end of the examined sample comparing the two markets the brent crude oil shows stronger signs of inefficiency during the inefficient periods compared to the wti crude oil this is in hand with the results reported in the original study apart from rerunning the analysis on an extended dataset and using two additional methods we also provide a firmer validity check using the moving block bootstrap procedure which outperforms the original shuffling procedure in the provided forecasting study

the terms of trade the real exchange rate and economic fluctuations this paper examines the relationship between terms of trade and business cycles using a three sector intertemporal equilibrium model and a large multicountry database results show that terms of trade shocks account for nearly one half of actual gdp variability the model explains weak correlations between net exports and terms of trade the harberger laursen and metzler effect and produces large and weakly correlated deviations from purchasing power parity and real interest rate parity terms of trade shocks cause real appreciations and positive interest differentials although productivity shocks have opposite effects the puzzle that welfare gains of international asset trading are negligible is left unresolved copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the dynamics of crude oil price differentials abstract crude oil price differentials are modelled as a two regime threshold autoregressive tar process using the method proposed by caner and hansen caner m hansen b e threshold autoregression with a unit root econometrica 2001 69 1555 1596 while standard unit root tests suggest that the prices of crude oil of different varieties move closely together such that their price differential is stationary the tar results indicate strong evidence of threshold effects in the adjustment process to the long run equilibrium these findings suggest that crude oil prices are linked and thus at the very general level the oil market is one great pool adelman m a international oil agreements the energy journal 1984 5 1 9 however differences in the dynamics of adjustment suggest that within this one pool oil markets are not necessarily integrated in every time period and hence the dynamics of crude oil price differentials may not follow a stationary process at all times although the development of a liquid futures market around the crude oil benchmarks has helped make some distant markets more unified arbitrage is not costless or risk free and temporary breakdowns in the benchmarks can lead to decoupling of crude oil prices

why the long term auto correlation has not been eliminated by arbitragers evidences from nymex abstract the efficient market hypothesis claims that market prices follow the random walk and that any predictable trend will be eliminated by arbitragers in a short period of time however the fractal market hypothesis disagrees asserting that long term memory can persist in the market to understand why this conflict exists we propose a method to explore the long term market trend using the local hurst exponent and seek to obtain the extra yield performance is evaluated by using both a simulation and the high frequency 5 min data and the daily data the result indicates that the model performs well with the uni fractal series in the simulation however the model shows limited predictive abilities with the data from the real market due to the multi fractal characteristics although the long term trends persist in the markets and can be identified with statistical significance traders cannot beat the market because of the time varying feature and because the strength of long term memory is not strong enough to cover the transaction costs the result reconciles the long term auto correlations with emh in a quantitative manner

testing the evolution of crude oil market efficiency data have the conn utilising a time varying gar 1 tgarch 1 1 model with different frequency data we investigate the weak form efficiency of major global crude oil spot markets in europe the us the uae and china for the period from december 2001 to august 2013 our empirical results with weekly data indicate that all four markets have reached efficiency with few brief inefficient periods during the past decade whereas the daily crude oil returns series suggest intermittent and inconsistent efficiency we argue that the weekly friday series fit the data better than the average series in autocorrelation tests the evidence suggests that all four markets exhibit asymmetries in return volatility reactions to different information shocks and that they react more strongly to bad news than to good news the 2008 financial crisis has significantly affected the efficiency of oil markets furthermore a comovement phenomenon and volatility spillover effects exist among the oil markets policy recommendations consistent with our empirical results are proposed which address three issues implementing prudential regulations establishing an asian pricing centre and improving transparency in crude oil spot markets

random fractal structures in north american energy markets this paper uses daily observations on west texas intermediate wti crude oil prices at chicago and henry hub natural gas prices at la over the deregulated period of the 1990s and various tests from statistics and dynamical systems theory to support a random fractal structure for north american energy markets in particular this evidence is supported by the vassilicos et al 1993 multifractal structure test and the ghashghaie et al nature 381 1996 767 turbulent behavior test

time varying long range dependence in energy futures markets abstract this study aims to investigate the presence of long range dependence in energy futures markets using a daily dataset covering from 1990 to 2013 which includes crucial events for energy markets such as invasion of iraq and global financial crisis of 2008 we estimate time varying generalized hurst exponents of several energy futures contracts with different times to maturity using a rolling window approach results reveal that efficiency of energy futures markets is clearly time varying and changes drastically over the sample period for futures contracts with 1 4 months to maturities crude oil and gasoline are found to be more efficient compared to others on the other hand for contracts with 5 9 months to maturities crude oil and natural gas futures are more efficient for almost every different month to maturity heating oil and gas oil futures are found to be the least efficient markets moreover in general the efficiency of energy futures markets is found to be decreasing dramatically when time to maturity is increasing several implications are discussed

modeling and forecasting the volatility of petroleum futures prices we investigate volatility models and their forecasting abilities for three types of petroleum futures contracts traded on the new york mercantile exchange west texas intermediate crude oil heating oil 2 and unleaded gasoline and suggest some stylized facts about the volatility of these futures markets particularly in regard to volatility persistence or long memory properties in this context we examine the persistence of market returns and volatility simultaneously using the following arfima garch class models arima garch arfima garch arfima igarch and arfima figarch although the arfima figarch model better captures long memory properties of returns and volatility the out of sample analysis indicates no unique model for all three types of petroleum futures contracts suggesting that investors should be careful when measuring and forecasting the volatility risk of petroleum futures markets

commodity futures and market efficiency we propose a comprehensive treatment of the leverage effect i e the relationship between returns and volatility of a specific asset focusing on energy commodities futures namely brent and wti crude oils natural gas and heating oil after estimating the volatility process without assuming any specific form of its behavior we find the volatility to be long term dependent with the hurst exponent on a verge of stationarity and non stationarity to overcome such complication we utilize the detrended cross correlation and the detrending moving average cross correlation coefficients and we find the standard leverage effect for both crude oils and heating oil for natural gas we find the inverse leverage effect additionally we report that the strength of the leverage effects is scale dependent finally we also show that none of the effects between returns and volatility is detected as the long term cross correlated one these findings can be further utilized to enhance forecasting models and mainly in the risk management and portfolio diversification

electricity prices and fuel costs long run relations and short run dynamics the paper examines the long run relation and short run dynamics between electricity prices and three fossil fuel prices coal natural gas and crude oil using annual data for the u s for 1960 2007 the results suggest 1 a stable long run relation between real prices for electricity and coal 2 bi directional long run causality between coal and electricity prices 3 insignificant long run relations between electricity and crude oil and or natural gas prices and 4 no evidence of asymmetries in the adjustment of electricity prices to deviations from equilibrium a number of implications are addressed

the 2014 oil bust causes and consequences abstract this article suggests that the 2014 oil price collapse was possibly triggered by the falling euro versus the us dollar specifically the usd eur exchange rate likely adjusted to the sudden economic growth outlook divergence between the us and the eu as evident by the relative short term interest rate spread measures and triggered a strong dollar trade which is negative for the crude oil prices thus in our view the 2014 oil price bust is another episode of oil price inefficiency similar to the 2008 oil bubble the key argument presented in this article is that as long as there are temporary economic growth divergences between the us and the eu the resulting exchange rate volatility is likely to create the pricing inefficiencies in crude oil which in fact are mean reverting as the economic growth divergences eventually dissipate

valuing oil properties integrating option pricing and decision analysis approaches there are two major competing procedures for evaluating risky projects where managerial flexibility plays an important role one is decision analytic based on stochastic dynamic programming and the other is option pricing theory or contingent claims analysis based on the no arbitrage theory of financial markets in this paper we show how these two approaches can be profitably integrated to evaluate oil properties we develop and analyze a model of an oil property either a developed property or a proven but undeveloped reserve where production rates and oil prices both vary stochastically over time and at any time the decision maker may terminate production or accelerate production by drilling additional wells the decision maker is assumed to be risk averse and can hedge price risks by trading oil futures contracts we also describe extensions of this model that incorporate additional uncertainties and options discuss its use in exploration decisions and in evaluating a portfolio of properties rather than a single property and briefly describe other potential applications of this integrated methodology

are the crude oil markets becoming more efficient over time new evidence from a generalized spectral test this paper utilizes the newly developed method of a generalized spectral test to examine the weak form efficiency of the main worldwide crude oil markets the generalized spectral test unlike other methods can detect both linear and nonlinear serial dependence in the conditional mean and allows for different forms of unknown conditional heteroscedasticity by using a rolling sample approach instead of an analysis of different time periods we find that the efficiency of oil markets may depend on time periods the main global crude oil markets reach weak form efficiency in the long term and the degree of efficiency of global oil markets changes over time among the oil markets examined in this study the brent and the wti oil markets possess the highest efficiency levels whereas the daqing oil market has the lowest efficiency level apparent anti synchronization is detected between the efficiency of brent and wti markets in recent years whereas synchronization is found between the efficiency of daqing and dubai oil markets during the last decade

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed

efficiency of crude oil markets evidences from informational entropy analysis abstract the role of crude oil as the main energy source for the global economic activity has motivated the discussion about the dynamics and causes of crude oil price changes an accurate understanding of the issue should provide important guidelines for the design of optimal policies and government budget planning using daily data for wti over the period january 1986 march 2011 we analyze the evolution of the informational complexity and efficiency for the crude oil market through multiscale entropy analysis the results indicated that the crude oil market is informationally efficient over the scrutinized period except for two periods that correspond to the early 1990s and late 2000s us recessions overall the results showed that deregulation has improved the operation of the market in the sense of making returns less predictable on the other hand there is some evidence that the probability of having a severe us economic recession increases as the informational efficiency decreases which indicates that returns from crude oil markets are less uncertain during economic downturns