The Oil Price Crash in 2014/15: Was There a (Negative) Financial Bubble?

Dean Fantazzini

MPRA Paper from University Library of Munich, Germany

Abstract: This paper suggests that there was a negative bubble in oil prices in 2014/15, which decreased them beyond the level justified by economic fundamentals. This proposition is corroborated by two sets of bubble detection strategies: the first set consists of tests for financial bubbles, while the second set consists of the log-periodic power law (LPPL) model for negative financial bubbles. Despite the methodological differences between these detection methods, they provided the same outcome: the oil price experienced a statistically significant negative financial bubble in the last months of 2014 and at the beginning of 2015. These results also hold after several robustness checks which consider the effect of conditional heteroskedasticity, model set-ups with additional restrictions, longer data samples, tests with lower frequency data and with an alternative proxy variable to measure the fundamental value of oil.

Keywords: Oil; WTI; Brent; Generalized sup ADF test; LPPL; Bubble (search for similar items in EconPapers)
JEL-codes: C15 C22 C51 C53 G17 O13 Q47 (search for similar items in EconPapers)
Date: 2016-06-06
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (52)

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Journal Article: The oil price crash in 2014/15: Was there a (negative) financial bubble? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72094

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