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Long memory and crude oil’s price predictability

  • S.I.: Recent Developments in Financial Modeling and Risk Management
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Abstract

This paper discusses the usefulness of the long term memory property in price prediction. In particular, the Hurst’s exponents related to a wide set of portfolios generated by three crude oils are estimated by using the detrended fluctuation analysis. To this aim, the daily empirical data on West Texas Intermediate, Brent crude oil and Dubai crude oil for a period of more than 10 years have been considered. It is shown that specific combinations are associated to persistence/antipersistence long-run behaviors, and this highlights the presence of statistical arbitrage opportunities. Such an outcome shows that long term memory can effectively serve as price predictor.

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Authors and Affiliations

  1. Department of Economics and Law, University of Macerata, Via Crescimbeni 20, I - 62100, Macerata, Italy

    Roy Cerqueti

  2. Department of Economics, Management and Business Law, University of Bari, Largo Abbazia Santa Scolastica 53, 70124, Bari, Italy

    Viviana Fanelli

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  1. Roy Cerqueti
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  2. Viviana Fanelli
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Correspondence to Roy Cerqueti.

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Cerqueti, R., Fanelli, V. Long memory and crude oil’s price predictability. Ann Oper Res 299, 895–906 (2021). https://doi.org/10.1007/s10479-019-03376-y

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  • DOI: https://doi.org/10.1007/s10479-019-03376-y

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