EconPapers    
Economics at your fingertips  
 

Speculative bubbles in recent oil price dynamics: Evidence from a Bayesian Markov-switching state-space approach

Marc Lammerding, Patrick Stephan, Mark Trede () and Bernd Wilfling

Energy Economics, 2013, vol. 36, issue C, 491-502

Abstract: Motivated by repeated spikes and crashes during previous decades we investigate whether the heavily financialized market for crude oil has been driven by speculative bubbles. In our theoretical modeling we draw on the convenience yield approach in order to approximate the fundamental value of the oil price. We separate the oil price fundamental from the bubble component by expressing a standard present-value oil price model in state-space form. We then introduce two Markov-regimes into the state-space representation in order to distinguish between two distinct phases in the bubble process, namely one in which the oil price bubble is a stable process and one in which the bubble explodes. We estimate the entire Markov-switching state-space specification using an econometrically robust Bayesian Markov-Chain-Monte-Carlo (MCMC) methodology. Based on inferential techniques designed for statistically separating both Markov-regimes in the bubble process from each other, we find robust evidence for the existence of speculative bubbles in recent oil price dynamics.

Keywords: Speculative bubbles; Oil price; Markov-switching model; State-space model; Bayesian econometrics (search for similar items in EconPapers)
JEL-codes: G10 G12 Q40 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (74)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988312002496
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Speculative bubbles in recent oil price dynamics: Evidence from a Bayesian Markov-switching state-space approach (2012) Downloads
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:eee:eneeco:v:36:y:2013:i:c:p:491-502

DOI: 10.1016/j.eneco.2012.10.006

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-31
Handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:491-502