Weak form market efficiency test of oil markets based on generalized spectrum method

Author

Lv, Wen-Dong ; Pan, Hui-Feng

Author_Institution

Sch. of Bus., Univ. of Int. Bus. & Econ., Beijing, China

fYear

2009

fDate

14-16 Sept. 2009

Firstpage

1691

Lastpage

1695

Abstract

Understanding of market efficiency is the cornerstone of market analysis. Oil market efficiency test can not only provide the theoretical foundation for oil price forecast but offer evidence of comparing the information efficiency of different markets. The generalized spectrum method is applied on the daily data from January 2001 to July 2008 to test the weak form efficiency of main crude oil markets in the world. Allowing for the stylized facts of high frequency data, this method can capture linear and nonlinear serial dependence while being robust to unknown form of conditional heteroskedasticity and checking all the lags. The results indicate that WTI of US and Brent of Europe have reached weak form efficiency; however, OPEC´s and China´s oil markets do not. The main cause is analyzed from the angles of market trading systems and the structure of market participants.

Keywords

crude oil; economic forecasting; international trade; petroleum industry; pricing; OPEC; conditional heteroskedasticity; crude oil markets; generalized spectrum method; market trading systems; oil market efficiency; oil price forecast; Banking; Conference management; Economic forecasting; Engineering management; Europe; Finance; Financial management; Petroleum; Predictive models; Testing; generalized spectrum; oil markets; weak form efficiency;

fLanguage

English

Publisher

ieee

Conference_Titel

Management Science and Engineering, 2009. ICMSE 2009. International Conference on

Conference_Location

Moscow

Print_ISBN

978-1-4244-3970-6

Electronic_ISBN

978-1-4244-3971-3

Type

conf

DOI

10.1109/ICMSE.2009.5317863

Filename

5317863