Abstract
In this paper, we examine the weak-form efficient market hypothesis of crude oil futures markets by testing for the random walk behavior of prices. Using a method borrowed from statistical physics, we find that crude oil price display weak persistent behavior for time scales smaller than a year. For time scales larger than a year, strong mean-reversion behaviors can be found. That is, crude oil futures markets are not efficient in the short-term or in the long-term. By quantifying the market inefficiency using a “multifractality degree”, we find that the futures markets are more inefficient in the long-term than in the short-term. Furthermore, we investigate the “stylized fact” of volatility dynamics on market efficiency. The simulating and empirical results indicate that volatility clustering, volatility memory and extreme volatility have adverse effects on market efficiency, especially in the long-term.
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Wang, Y., Wu, C. Efficiency of Crude Oil Futures Markets: New Evidence from Multifractal Detrending Moving Average Analysis. Comput Econ 42, 393–414 (2013). https://doi.org/10.1007/s10614-012-9347-6
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DOI: https://doi.org/10.1007/s10614-012-9347-6