Interpreting the movement of oil prices: Driven by fundamentals or bubbles?

Yue-Jun Zhang () and Ting Yao

Economic Modelling, 2016, vol. 55, issue C, 226-240

Abstract: Based on the historical data of crude oil, diesel and gasoline markets during November 2001–December 2015, this paper employs the state-space model and log-periodic power law (LPPL) model to explore the dynamic bubbles of oil prices and predict their crash time. The results indicate that, first, oil price bubbles only exist during November 2001–July 2008, and crude oil and diesel prices are significantly driven by bubbles, whereas gasoline prices are mainly driven by fundamentals. Second, the state-space model captures the time-varying bubbles of crude oil and diesel prices. Finally, the LPPL model well predicts the crash time of bubbles.

Keywords: Oil price; Bubble; State-space model; LPPL (search for similar items in EconPapers)
JEL-codes: G15 Q4 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:55:y:2016:i:c:p:226-240

DOI: 10.1016/j.econmod.2016.02.016

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