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The efficiency of the crude oil markets: Evidence from variance ratio tests

Amelie Charles and Olivier Darné

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Abstract: This study examines the random walk hypothesis for the crude oil markets, using daily data over the period 1982-2008. The weak-form efficient market hypothesis for two crude oil markets (UK Brent and US West Texas Intermediate) is tested with non-parametric variance ratio tests developed by [Wright J.H., 2000. Alternative variance-ratio tests using ranks and signs. Journal of Business and Economic Statistics, 18, 1-9] and [Belaire-Franch J. and Contreras D., 2004. Ranks and signs-based multiple variance ratio tests. Working paper, Department of Economic Analysis, University of Valencia] as well as the wild-bootstrap variance ratio tests suggested by [Kim, J.H., 2006. Wild bootstrapping variance ratio tests. Economics Letters, 92, 38-43]. We find that the Brent crude oil market is weak-form efficiency while the WTI crude oil market seems to be inefficiency on the 1994-2008 sub-period, suggesting that the deregulation have not improved the efficiency on the WTI crude oil market in the sense of making returns less predictable.

Keywords: Crude oil markets; Market efficiency; Variance ratio test (search for similar items in EconPapers)
Date: 2009
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00771081
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Published in Energy Policy, Elsevier, 2009, 37 (11), pp.4267-4272. ⟨10.1016/j.enpol.2009.05.026⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00771081

DOI: 10.1016/j.enpol.2009.05.026

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