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Long Memory in Oil and Refined Products Markets

Kyongwook Choi and Shawkat Hammoudeh

Year: 2009
Volume: Volume 30
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No2-5
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Abstract:
We test for the presence of long memory in daily oil and refined products prices absolute return, squared return and conditional volatility, using several parametric and semiparametric methods. This study finds strong evidence of long memory (LM) in the daily absolute and squared spot and futures returns for crude oil, gasoline and heating oil but at different degrees. The FIGARCH model also demonstrates strong evidence of LM for volatility for most of oil and products prices returns, with also different resilience levels. Structural breaks have only the partial effects of slightly reducing persistence for just absolute and squared returns. Examining the forecasting behavior of two competing models, the less parsimonious ARFIMA which satisfies the LM property, and the parsimonious ARMA with short-term processes, the ARFIMA model provides significantly better out-of-sample forecasts at all forecasting horizons for all three petroleum types.



Asymmetric Adjustments in Oil and Metals Markets

Shawkat Hammoudeh, Li-Hsueh Chen and Bassam Fattouh

Year: 2010
Volume: Volume 31
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No4-9
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Abstract:
Using the threshold cointegration methods, Enders-Siklos (2001) and Hansen-Seo (2002), this study finds that spot and futures prices in each of the four widely traded commodities, copper, gold, WTI oil and silver are asymmet�rically co-integrated. However, the asymmetric adjustment to the long-run equi�librium differs among those commodities, reflecting different profitable opportu�nities. The adjustment is faster for copper after positive shocks, while it is faster for the safe havens oil, gold and silver after negative shocks. It is more the spot and not the futures price for the four commodities that focuses in its adjustment on long-run factors. In sum, the adjustments imply different trading strategies, depending on whether the faster adjustment happened from above or below the threshold.



Systemic Risk for Financial Institutions in the Major Petroleum-based Economies: The Role of Oil

Ahmed Khalifa, Massimiliano Caporin, Michele Costola, and Shawkat Hammoudeh

Year: 2021
Volume: Volume 42
Number: Number 6
DOI: 10.5547/01956574.42.6.akha
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Abstract:
We examine the relationship between oil returns and systemic risk of financial institutions in major petroleum-based economies. By estimating ΔCoVaR, we observe the presence of remarkable increases in risk levels during the financial crises and achieve a better risk measurement when oil returns are included in the risk functions. Moreover, the estimated spread between the CoVaR without and with oil returns is absorbed in a time range that is longer than the duration of the oil shocks. This indicates that drops in oil prices which have a longer effect on risk and financial institutions require more time to account for their impact. Policy implications are also provided.



The Threshold Role of FDI Flows in the Energy-Growth Nexus: An Endogenous Growth Perspective

Olayeni Olaolu Richard, Jemiluyi Olayemi Olufunmilayo, Aviral Kumar Tiwari, and Shawkat Hammoudeh

Year: 2023
Volume: Volume 44
Number: Number 5
DOI: 10.5547/01956574.44.4.oric
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Abstract:
In this paper, we have investigated the implications of the threshold effect of changes in FDI inflows for the nexus between energy consumption and economic growth in eight under-researched sub-Saharan African countries for the period 1971–2016. The countries are Benin, Congo, Kenya, Nigeria, Senegal, South Africa, Sudan, and Zambia. Using the lag-augmented VAR (LAVAR) model (corrected for cross-sectional dependence), we develop an empirical framework tightly linked to the endogenous growth model that allows for a threshold effect of changes (strength and weakness) in FDI inflows on the nexus. Our findings show that the FDI inflows matter for the causal link between energy consumption and economic growth in some countries, although, for the cross-section as a whole, our bootstrap simulation supports the neutrality hypothesis. The overall results suggest that an energy demand policy, such as an energy conservation policy, should not cause any significant adverse side-effects to economic growth in those sub-Saharan African countries. Policy implications of the threshold effect for the nexus for individual sub-Saharan African countries are also provided.





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