Comparative Analysis of Market Efficiency and Volatility of Energy Prices Before and During COVID-19 Pandemic Periods

Oluwayemisi O. Alaba, Oluwadare O. Ojo, Olaoluwa Yaya, Nurudeen Abu and Saheed A. Ajobo

MPRA Paper from University Library of Munich, Germany

Abstract: The Covid-19 pandemic has affected energy demand and pricing globally due to different lockdown measures embarked on by governments in different economies. As a result, prices of oil and petroleum products dropped drastically at the peak of the pandemic period. The present paper, therefore, investigates the effect of the pandemic on energy markets and compared the levels of market efficiency, volatility, and volatility persistence. Two 5-monthly daily data windows are considered, each for the period before and during the pandemic, and an updated nonlinear fractional integration approach in time series analysis is employed. Having considered prices of Crude oil, Gasoline, Diesel, Heating oil, Kerosene, and Propane from US markets, we find that energy markets are less efficient during the Covid-19 pandemic period, even though with higher volatility but with lesser volatility persistence compared to the period before the pandemic. Thus, volatility shocks last for a shorter period during the 5-month pandemic period than in the 5-month period that precedes the pandemic. It is hoped that the findings of this work will be of interest to oil marketers and administrators in the international oil markets.

Keywords: Energy price; Covid-19 pandemic; Efficient market; Volatility persistence; Fractional integration (search for similar items in EconPapers)
JEL-codes: C22 Q41 Q48 (search for similar items in EconPapers)
Date: 2021-09-21
New Economics Papers: this item is included in nep-ene and nep-isf
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