Volatility and efficiency of the world crude oil market

Abstract

Purpose – The purpose of this paper is to examine volatility and the weak-form efficient market hypothesis (random walk) of world spot crude oil market. Design/methodology/approach – The study uses the generalized autoregressive conditional heteroskedasticity (GARCH-M), exponential generalized autoregressive conditional heteroskedasticity (EGARCH), and threshold GARCH (TGARCH) models. The data are selected from three markets: Dubai Vetch (DV), West Texas Intermediate, and Europe Brent Spot Price. Findings – The weak-form efficient market (random walk) hypothesis was rejected for all estimated GARCH-M, EGARCH, and TGARCH models, indicating that these markets are inefficient and predictable. For daily data, the empirical results showed the presence of asymmetric effects, and the conditional variance process was found to be highly persistent. Originality/value – This study is unique in its nature as it examines three markets on three continents. In addition, one of these markets (DV) was not carried out by the previous study. This work takes into account the market location.

Oil industry in the international context, 2010–2017: an analysis of efficiency through the network DEA model

“…Other studies where parametric methodologies are used is the case of Al Fawzan (2015), who carried out a study to analyze the efficiency of the crude oil market using generalized and exponential autoregressive conditional heteroscedasticity models, and De la Hoz et al…”

“…Other studies where parametric methodologies are used is the case of Al Fawzan (2015), who carried out a study to analyze the efficiency of the crude oil market using generalized and exponential autoregressive conditional heteroscedasticity models, and De la Hoz et al (2014) presented a productivity and profitability indicator behavior study for the oil and gas sector in Colombia between 2008 and 2010. They used a qualitative and quantitative analysis with the multivariate discriminant analysis (ADM) methodology.…”