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Title: Mild explosivity in recent crude oil prices Authors:  Isabel Figuerola-Ferretti - Universidad Pontificia Comillas (Spain) [presenting]
Roderick McCrorie - University of St Andrews (United Kingdom)
Ioannis Paraskevopoulos - Bankia (Spain)
Abstract: The new, mildly explosive/multiple bubbles technology is used to assess whether crude oil prices over the last decade have exhibited departures from martingale trend behavior and to explore whether any such departures indicate divergence from fundamental value. The test dates two significant time periods in both Brent and WTI front-month futures: a mildly explosive episode within the 2007-08 oil price spike, immediately prior to the peak of the Global Financial Crisis; and a negative such episode during the recent oil price decline, whose commencement is dated around a key OPEC meeting in November 2014. Evidence using other commodity prices and indices, themselves declining recently, points to factors beyond commodity markets. We find the CBOE Volatility Index (VIX), a financial variable which acts as an omnibus gauge of market-based expectations, echoes both departures in trend; however there is no one factor among fundamental proxy variables such as global economic activity or inventories, or other financial variables, which is itself decisive in explaining the recent price decline.