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Breaks in term structures: Evidence from the oil futures markets

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  • Lajos Horváth
  • Zhenya Liu
  • Curtis Miller
  • Weiqing Tang

Abstract

We propose a new functional change point detection procedure, motivated by recent models for commodity futures term structure. We investigate our procedure's properties under the null hypothesis of no change and the alternative. Monte Carlo simulations reveal a reasonable power property in finite sample sizes although size distortion persists. An empirical analysis of oil futures markets identifies two change points near the 2008 financial crisis and 2020 crude oil negative territory. Regression models show that the price behaviour, in general, is exposed to the spot market index and exchange rate from 2007 to 2009. The main drivers of the price term structure are attributed to the trading activities of speculators and financial index innovations between 2017 and 2022.

Suggested Citation

  • Lajos Horváth & Zhenya Liu & Curtis Miller & Weiqing Tang, 2024. "Breaks in term structures: Evidence from the oil futures markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2317-2341, April.
    • Handle: RePEc:wly:ijfiec:v:29:y:2024:i:2:p:2317-2341
    DOI: 10.1002/ijfe.2777
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