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Time varying market efficiency in the Brent and WTI crude market

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  • Okoroafor, Ugochi Chibuzor
  • Leirvik, Thomas

Abstract

This paper examines time-varying market efficiency in the crude oil spot market using a recently derived measure of market efficiency: the Adjusted Market Inefficiency Model (AMIM). Analysing efficiency in the crude oil market, and its response to significant events within the global financial and commodity market, we identify that the Brent market is on average more efficient than the West Texas Intermediate (WTI). We also find that the WTI market is persistently inefficient during financial crises, with high volatility of the efficiency in such periods. In addition to confirming the adaptive market hypothesis, this study offers a new perspective by highlighting the non-uniform response of efficiency in similar markets to global events.

Suggested Citation

  • Okoroafor, Ugochi Chibuzor & Leirvik, Thomas, 2022. "Time varying market efficiency in the Brent and WTI crude market," Finance Research Letters, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002634
    DOI: 10.1016/j.frl.2021.102191
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    Cited by:

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    2. Abdollahi, Hooman & Junttila, Juha-Pekka & Lehkonen, Heikki, 2024. "Clustering asset markets based on volatility connectedness to political news," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 93(C).
    3. Clement Moyo & Izunna Anyikwa & Andrew Phiri, 2023. "The Impact of Covid-19 on Oil Market Returns: Has Market Efficiency Being Violated?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 118-127, January.
    4. Shang, Yuping & Ma, Xiaowei & Bhatia, Meena & Alofaysan, Hind & Walsh, Steven T., 2024. "Unveiling the enigma: Exploring how uncertain crude oil prices shape investment expenditure and efficiency in Chinese enterprises," Energy Economics, Elsevier, vol. 132(C).
    5. Ren, Xiaohang & Xiao, Ya & Duan, Kun & Urquhart, Andrew, 2024. "Spillover effects between fossil energy and green markets: Evidence from informational inefficiency," Energy Economics, Elsevier, vol. 131(C).
    6. Okoroafor, Ugochi C. & Leirvik, Thomas, 2023. "Time-varying market efficiency of safe-haven assets," Finance Research Letters, Elsevier, vol. 56(C).
    7. Lee, Min-Jae & Choi, Sun-Yong, 2024. "Insights into the dynamics of market efficiency spillover of financial assets in different equity markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 641(C).
    8. Roy, Archi & Soni, Anchal & Deb, Soudeep, 2023. "A wavelet-based methodology to compare the impact of pandemic versus Russia–Ukraine conflict on crude oil sector and its interconnectedness with other energy and non-energy markets," Energy Economics, Elsevier, vol. 124(C).
    9. Almeida, José & Gonçalves, Tiago Cruz, 2024. "The AI revolution: are crypto markets more efficient after ChatGPT 3?," Finance Research Letters, Elsevier, vol. 66(C).
    10. Espinosa-Paredes, G. & Rodriguez, E. & Alvarez-Ramirez, J., 2022. "A singular value decomposition entropy approach to assess the impact of Covid-19 on the informational efficiency of the WTI crude oil market," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).

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    More about this item

    Keywords

    Adaptive Market Hypothesis; Crude oil prices; Market efficiency;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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