Structural Change in the Crude Oil Price Dynamic: Theoretical Study and Practical Implications

Francisco Giron¨¦s (), Fernando Guerra (), Jorge Hern¨¢ndez () and Javier Poblaci¨®n ()

Business and Economic Research, 2013, vol. 3, issue 1, 38-55

Abstract: As many researchers know, the price of oil was affected by a structural change, which we analyzed. We obtained the result of the Chow test (determining the date when the structural break occurred). We observed that important data such as the variance or the VAR vary significantly depending on the period that the data are taken from, with huge implications in the financial world. If an investor wanted to create a portfolio, selecting an inadequate variance and VAR could lead to erroneous results. If an investor creates a portfolio composed of certain assets and assumes a volatility of 20%, and volatility is actually 30%, the actual results could vary materially from those expected. In this study, we observed that the variance is generally higher after the structural change in oil and for oil companies.

Keywords: Structural Change; Commodity Prices; Value-at-Risk; Causality (search for similar items in EconPapers)
JEL-codes: C32 C51 C60 G13 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.macrothink.org/journal/index.php/ber/article/view/2673/2720 (application/pdf)
http://www.macrothink.org/journal/index.php/ber/article/view/2673 (text/html)

Related works:
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:mth:ber888:v:3:y:2013:i:1:p:38-55

Access Statistics for this article

Business and Economic Research is currently edited by Daisy Young

More articles in Business and Economic Research from Macrothink Institute
Bibliographic data for series maintained by Technical Support Office ( this e-mail address is bad, please contact ).