Kristoufek, L. & Lunackova, P.: Rockets and feathers meet Joseph: Reinvestigating the oil-gasoline asymmetry on the international markets
| Author(s): | prof. PhDr. Ladislav Krištoufek Ph.D., PhDr. Petra Luňáčková Ph.D., |
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| Type: | Articles in journals with impact factor |
| Year: | 2015 |
| Number: | 0 |
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| Published in: | Energy Economics 49, pp. 1-8 arXiv PDF |
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| Keywords: | rockets and feathers, asymmetry, gasoline, crude oil, cointegration |
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| Grants: | GACR P402/11/0948 Developing Analytical Framework for Energy Security: Time-Series Econometrics, Game Theory, Meta-Analysis and Theory of Regulation GAČR 14-11402P Bivariate long memory analysis of financial time series (2014-2016) |
| Abstract: | We reinvestigate the "rockets and feathers" effect between retail gasoline and crude oil prices in a new framework of fractional integration, long-term memory and borderline (non)stationarity. The most frequently used error-correction model is examined in detail and we find that the prices return to their equilibrium value much more slowly than would be typical for the error-correction model. Such dynamics is usually referred to as ``the Joseph effect''. The standard procedure is shown to be troublesome and we introduce two new tests to investigate possible asymmetry in the price adjustment to equilibrium under these complicated time series characteristics. On the dataset of seven national gasoline prices, we find no statistically significant asymmetry. The proposed methodology is not limited to the gasoline and crude oil case but it can be utilized for any asymmetric adjustment analysis. |
