Analysis of brand influence in the rockets and feathers effect using disaggregated data

This paper studies price asymmetries (the ‘rockets and feathers effect’) at the firm level using an approach that fundamentally differs from the previous literature. The research analyses the Spanish oil market, using more than 11 million daily price records from December, 23, 2014, to December 31,...

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Bibliographic Details
Published in:Research in international business and finance 2020-04, Vol.52, p.101168, Article 101168
Main Authors: Palencia-González, Francisco J., Navío-Marco, Julio, Juberías-Cáceres, Gema
Format: Article
Language:English
Subjects:
Oil market
Oil pricing
Price adjustments
Rockets and feathers
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Summary:This paper studies price asymmetries (the ‘rockets and feathers effect’) at the firm level using an approach that fundamentally differs from the previous literature. The research analyses the Spanish oil market, using more than 11 million daily price records from December, 23, 2014, to December 31, 2017. We apply the most common econometric approach to investigate asymmetry, the error correction model, and find asymmetries for all brands, either classic brands or low-cost flag brands. Classic brands make price adjustments in shorter periods, whereas supermarket brands, as well as independent and low-cost brands, correct prices only slowly. This research makes an original contribution to the study of the rockets and feathers phenomenon using brands as the units of analysis. The speed of price adjustments is especially relevant to understanding oil market price dynamics.
ISSN:0275-5319
1878-3384
DOI:10.1016/j.ribaf.2019.101168