Measuring price efficiency in petroleum markets: New insights using various long-range dependence techniques

Aviral Tiwari, Emmanuel Abakah, Salma Mefteh-Wali and Patrick Owusu

Resources Policy, 2023, vol. 82, issue C

Abstract: This paper empirically measures pricing efficiency in the petroleum markets using a battery of long-range dependence techniques. We analyse the volatility (absolute returns) of fourteen petroleum products using daily prices from January 1990 to April 2020. We use bootstrapping techniques to estimate the confidence intervals of the long-range dependence parameters. Overall results obtained using CMA-MAF, CMA-MSF, GPH and periodogram techniques suggest that there is no evidence of long-range dependence in absolute returns of petroleum markets prices indices at least at the 10% level of significance. For robustness purposes, findings from the rolling windows estimates reveal that the results are not affected by the normality assumption under different rolling window sizes. Furthermore, we find that Gas oil, Biofuel and Heating oil are the most correctly priced while Crude Oil Dubai emerging is the least efficient. Comparing the efficiency index of the all six crude oil returns in our sample, WTI oil was seen to be less efficient than Brent crude oil. In all, our work uncovers crucial implications for investors and policymakers.

Keywords: Long-range persistence; Petroleum price efficiency; Petroleum markets (search for similar items in EconPapers)
JEL-codes: C65 G14 Q40 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:82:y:2023:i:c:s0301420723001381

DOI: 10.1016/j.resourpol.2023.103430

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