Are oil prices efficient?

We investigate whether crude oil markets are weak-form efficient during different economic cycles over multi-scales using multifractal detrended fluctuation analysis. Using crude oil prices from 1996 to 2018, our results for different sub-samples provide evidence that in the shorter horizon, the eff...

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Bibliographic Details
Published in:Economic modelling 2021-03, Vol.96, p.362-370
Main Authors: Arshad, Shaista, Rizvi, Syed Aun R., Haroon, Omair, Mehmood, Fahad, Gong, Qiang
Format: Article
Language:English
Subjects:
Business administration
Energy market efficiency
Humanities and Social Sciences
Long horizon
Multifractality
Oil prices
Short horizon
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Summary:We investigate whether crude oil markets are weak-form efficient during different economic cycles over multi-scales using multifractal detrended fluctuation analysis. Using crude oil prices from 1996 to 2018, our results for different sub-samples provide evidence that in the shorter horizon, the efficiency of prices tends to improve across each post-recession period of expansion. However, in the longer horizon, we do not observe such improvements in efficiency during recovery after recessions, especially during the global recovery after 2010. Overall, we find that the benchmark Brent crude oil prices are weak-form efficient, which implies that prices are largely unpredictable. We reevaluate our results using weekly data and rolling time windows. The findings remain robust to both tests and the use of eight oil price benchmarks. •Oil markets are multifractal in nature.•Oil markets do not exhibit an improving efficiency.•Oil Markets are more efficient in the shorter horizon.
ISSN:0264-9993
1873-6122
DOI:10.1016/j.econmod.2020.03.018