The Oil Price Crash in 2014-15: Was There a Negative Financial Bubble Report as inadecuate




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Abstract

This paper suggests that there was a negative bubble in oil prices in 2014-15, which decreased them beyond the level justified by economic fundamentals. This proposition is corroborated by two sets of bubble detection strategies: the first set consists of tests for financial bubbles, while the second set consists of the log-periodic power law LPPL model for negative financial bubbles. Despite the methodological differences between these detection methods, they provided the same outcome: the oil price experienced a statistically significant negative financial bubble in the last monthsof 2014 and at the beginning of 2015. These results also hold after several robustness checks which consider the effect of conditional heteroskedasticity, model set-ups with additional restrictions, longer data samples, tests with lower frequency data and with an alternative proxy variable to measure the fundamental value of oil.



Item Type: MPRA Paper -

Original Title: The Oil Price Crash in 2014-15: Was There a Negative Financial Bubble?-

Language: English-

Keywords: Oil, WTI, Brent, Generalized sup ADF test, LPPL, Bubble-

Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: GeneralC - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion ProcessesC - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and EstimationC - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation MethodsG - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and SimulationO - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary ProductsQ - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q47 - Energy Forecasting-





Author: Fantazzini, Dean

Source: https://mpra.ub.uni-muenchen.de/72094/







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