Rockets and feathers meet Joseph: Reinvestigating the oil–gasoline asymmetry on the international markets

Ladislav Krištoufek () and Petra Lunackova

Energy Economics, 2015, vol. 49, issue C, 1-8

Abstract: We reinvestigate the “rockets and feathers” effect between retail gasoline and crude oil prices in a new framework of fractional integration, long-term memory and borderline (non)stationarity. The most frequently used error-correction model is examined in detail and we find that the prices return to their equilibrium value much more slowly than would be typical for the error-correction model. Such dynamics is usually referred to as “the Joseph effect”. The standard procedure is shown to be troublesome and we introduce two new tests to investigate possible asymmetry in the price adjustment to equilibrium under these complicated time series characteristics. On the dataset of seven national gasoline prices, we find no statistically significant asymmetry. The proposed methodology is not limited to the gasoline and crude oil case but it can be utilized for any asymmetric adjustment analysis.

Keywords: Rockets and feathers; Asymmetry; Gasoline; Crude oil; Cointegration (search for similar items in EconPapers)
JEL-codes: Q40 Q43 Q48 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Related works:
Working Paper: Rockets and Feathers Meet Joseph: Reinvestigating the Oil-gasoline Asymmetry on the International Markets (2015)
Working Paper: Rockets and feathers meet Joseph: Reinvestigating the oil-gasoline asymmetry on the international markets (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:49:y:2015:i:c:p:1-8

DOI: 10.1016/j.eneco.2015.01.013

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