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Will the energy price bubble burst?

Tie-Ying Liu and Chien-Chiang Lee ()

Energy, 2018, vol. 150, issue C, 276-288

Abstract: In this paper, we employ recursive unit-root tests to identify the beginnings and ends of potential speculative bubbles in the energy price market. The major advantage of this approach is that it allows one to account for a nonlinear structure and break while investigating the possible existence of multiple structural breaks resulting from these bubbles. The evidence finds the efficient market hypothesis has been the failure in most of the energy market. It shows that the gasoline spot market price is volatile, and investors in gasoline markets have more speculative opportunities than those investors who enter coal and oil markets. It is possible to hedge benefits in oil spot and future markets. Furthermore, the coal-gasoline price relation as well as the coal-crude oil price relation has a weak link, and the existing bubbles influence the interactions between the oil and gasoline markets.

Keywords: Energy price; Multiple bubbles; Nonlinear structure; Sup ADF test; Generalized sup ADF test; Speculative opportunities (search for similar items in EconPapers)
JEL-codes: C22 Q43 Q48 (search for similar items in EconPapers)
Date: 2018
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