Crude oil market efficiency: An empirical investigation via the Shannon entropy

Walid Mensi, Chaker Alaoui and Khuong Nguyen

International Economics, 2012, issue 129, 119–137

Abstract: This paper evaluates the time-varying degrees of weak-form efficiency of the crude oil markets using the Modified Shannon Entropy (MSE) and the Symbolic Time Series Analysis (STSA) approach. Using daily data from May 20, 1987 to March 6, 2012 for two worldwide crude oil benchmarks (West Texas Intermediate and Europe Brent), our findings reveal that the weak-form market efficiency of two oil markets evolves through time, but with different time trends. Moreover, the WTI market appears to be less efficient than the Europe Brent. These results have several implications for commodity portfolio hedgers and policymakers.

Keywords: Oil Prices; Information Theory; Shannon Entropy; Market Efficiency (search for similar items in EconPapers)
JEL-codes: C87 G14 G15 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepiie:2012-q1-129-5

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