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Dynamic structure of the spot price of crude oil: does time aggregation matter?

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  • Aghababa, Hajar
  • Barnett, William A.

Abstract

This paper assesses nonlinear structures in the time series data generating mechanism of crude oil prices. We apply well-known univariate tests for nonlinearity, with distinct power functions over alternatives, but with different null hypotheses reflecting the existence of different concepts of linearity and nonlinearity in the time series literature. We utilize daily data on crude oil spot price for over 26years, as well as monthly data on crude oil spot price for 41years. Investigating the monthly price of crude oil along with the daily price distinguishes the approach of this paper from existing studies focusing on the time series structure of crude oil price. All the tests detect strong evidence of general nonlinear serial dependence, as well as nonlinearity in the mean, variance, and skewness functions in the daily spot price of crude oil. Since evidence of nonlinear dependence is less dramatic in monthly observations, nonlinear serial dependence is moderated by time aggregation in crude oil prices but not significantly.

Suggested Citation

  • Aghababa, Hajar & Barnett, William A., 2016. "Dynamic structure of the spot price of crude oil: does time aggregation matter?," Energy Economics, Elsevier, vol. 59(C), pages 227-237.
    • Handle: RePEc:eee:eneeco:v:59:y:2016:i:c:p:227-237
    DOI: 10.1016/j.eneco.2016.07.023
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    More about this item

    Keywords

    Nonlinearity; Energy market; Time series analysis; Crude oil prices;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions

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