Long memory and crude oil’s price predictability

Roy Cerqueti () and Viviana Fanelli ()
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Roy Cerqueti: University of Macerata
Viviana Fanelli: University of Bari

Annals of Operations Research, 2021, vol. 299, issue 1, No 37, 895-906

Abstract: Abstract This paper discusses the usefulness of the long term memory property in price prediction. In particular, the Hurst’s exponents related to a wide set of portfolios generated by three crude oils are estimated by using the detrended fluctuation analysis. To this aim, the daily empirical data on West Texas Intermediate, Brent crude oil and Dubai crude oil for a period of more than 10 years have been considered. It is shown that specific combinations are associated to persistence/antipersistence long-run behaviors, and this highlights the presence of statistical arbitrage opportunities. Such an outcome shows that long term memory can effectively serve as price predictor.

Keywords: Commodities portfolio; Hurst’s exponent; Statistical arbitrage; Price predictability (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10479-019-03376-y

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