“Butterfly Effect" vs Chaos in Energy Futures Markets

Loretta Mastroeni and Pierluigi Vellucci

No 209, Departmental Working Papers of Economics - University 'Roma Tre' from Department of Economics - University Roma Tre

Abstract: In this paper we test for the sensitive dependence on initial conditions (the so called \butter y e ect") of energy futures time series (heating oil, natural gas), and thus the determinism of those series. Unlike previous studies, we test for the time series for sensitive dependence on initial conditions, introducing a coecient that describes the determinism rate of the series and that represents its reliability level (in percentage). The introduction of this reliability level is motivated by the fact that time series generated from stochastic systems also might show sensitive dependence on initial conditions. The reliability level obtained for the NYMEX energy futures considered here is always approximately 50% and this means that the stochastic component and the deterministic one turn up approximately in the same proportions. Such a tangible presence of a stochastic component does not warrant strong evidence of chaotic behaviour.

Keywords: nonlinear dynamics; chaos; butter y e ect; energy futures. (search for similar items in EconPapers)
JEL-codes: C45 C53 D40 Q47 (search for similar items in EconPapers)
Pages: 22
Date: 2016-10
New Economics Papers: this item is included in nep-ene
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Persistent link: https://EconPapers.repec.org/RePEc:rtr:wpaper:0209

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