Economics and Finance Faculty Publications and Presentations
Document Type
Article
Publication Date
1-2018
Abstract
In this paper we test for the existence of single and multiple episodes of explosive behavior in three energy sector indices (crude oil, heating oil, and natural gas) and five energy sector spot prices (West Texas Intermediate (WTI), Brent, heating oil, natural gas, and jet fuel). The results from the Supremum Augmented Dickey-Fuller (SADF) and the Generalized SADF tests provide strong statistical evidence of explosive behavior in all of our energy series. A simple theoretical framework of commodity pricing allows us to understand the assumptions to interpret explosive behavior as bubbles. By constructing implied convenience yields using futures prices we test the key assumption and we are able to identify the beginning and the end of bubble periods for the WTI, Brent, heating oil, and natural gas spot prices.
Recommended Citation
Sharma, Shahil, and Diego Escobari. “Identifying Price Bubble Periods in the Energy Sector.” Energy Economics 69 (January 1, 2018): 418–29. https://doi.org/10.1016/j.eneco.2017.12.007.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
First Page
418
Last Page
429
Publication Title
Energy Economics
DOI
10.1016/j.eneco.2017.12.007
Comments
© 2017 Elsevier B.V. Original published article available at https://doi.org/10.1016/j.eneco.2017.12.007