Regime Switching Mechanism during Energy Futures Price Bubbles

Ayben Koy
Additional contact information
Ayben Koy: Istanbul Commerce University, Turkey.

International Journal of Energy Economics and Policy, 2022, vol. 12, issue 1, 373-382

Abstract: In the last 20 years, many huge ups and downs have been seen in not only oil prices but also in other spot and derivative energy prices too. This study has two main purposes. The main purpose of the study is to detect bubbles and their beginning and ending dates in energy derivatives futures prices. Crude oil WTI, natural gas, and heating oil monthly prices are analyzed for the period beginning from 1990 to 2018. Following detecting bubbles, Markov Regime Switching Autoregressive (MSAR) models and Markov Regime Switching Vector Autoregressive (MSVAR) models are used to analyze the movement of the regime-switching mechanism between the bubble dates. The general evidence indicates that the switching mechanism during bubble periods has some mutual similarities as generally their direction is to regime 1 as recession with low/negative returns and high volatility. Following positive return periods in energy prices, mostly after the high return/high volatility periods, the market actors might face bubble collapses.

Keywords: Energy Futures; Bubble; Generalized Sup Augmented Dickey-Fuller; Markov Switching (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 Q41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.econjournals.com/index.php/ijeep/article/download/12549/6622/29643 (application/pdf)
http://www.econjournals.com/index.php/ijeep/article/view/12549/6622 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2022-01-46

Access Statistics for this article

International Journal of Energy Economics and Policy is currently edited by Ilhan Ozturk

More articles in International Journal of Energy Economics and Policy from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().