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Is efficiency of crude oil market affected by multifractality? Evidence from the WTI crude oil market

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  • Gu, Rongbao
  • Zhang, Bing

Abstract

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.

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  • Gu, Rongbao & Zhang, Bing, 2016. "Is efficiency of crude oil market affected by multifractality? Evidence from the WTI crude oil market," Energy Economics, Elsevier, vol. 53(C), pages 151-158.
    • Handle: RePEc:eee:eneeco:v:53:y:2016:i:c:p:151-158
    DOI: 10.1016/j.eneco.2014.10.014
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    Cited by:

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    10. Miroslava Zavadska & Lucía Morales & Joseph Coughlan, 2018. "The Lead–Lag Relationship between Oil Futures and Spot Prices—A Literature Review," IJFS, MDPI, vol. 6(4), pages 1-22, October.
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    More about this item

    Keywords

    Crude oil market; Inefficiency; Multifractality; Nonlinear correlation; Nonlinear Granger causality test;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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