Testing the weak-form efficiency of the WTI crude oil futures market

Zhi-Qiang Jiang, Wen-Jie Xie and Wei-Xing Zhou

Physica A: Statistical Mechanics and its Applications, 2014, vol. 405, issue C, 235-244

Abstract: The weak-form efficiency of energy futures markets has long been studied and empirical evidence suggests controversial conclusions. In this work, nonparametric methods are adopted to estimate the Hurst indexes of the WTI crude oil futures prices (1983–2012) and a strict statistical test in the spirit of bootstrapping is put forward to verify the weak-form market efficiency hypothesis. The results show that the crude oil futures market is efficient when the whole period is considered. When the whole series is divided into three sub-series separated by the outbreaks of the Gulf War and the Iraq War, it is found that the Gulf War reduced the efficiency of the market. If the sample is split into two sub-series based on the signing date of the North American Free Trade Agreement, the market is found to be inefficient in the sub-periods during which the Gulf War broke out. The same analysis on short-time series in moving windows shows that the market is inefficient only when some turbulent events occur, such as the oil price crash in 1985, the Gulf war, and the oil price crash in 2008.

Keywords: Crude oil futures; Weak-form efficiency; Bootstrapping (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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Related works:
Working Paper: Testing the weak-form efficiency of the WTI crude oil futures market (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:405:y:2014:i:c:p:235-244

DOI: 10.1016/j.physa.2014.02.042

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