Investigation of Weak Form Efficiency Hypothesis in Both High and Low Volatility Regimes of OPEC Crude Oil Market

Subject Areas : Journal of Investment Knowledge

mahmood mohammadi alamuti ¹ ( masters of financial mathematices, university of Ayatollah Borujerdi, Borujerd, Iran )
mohammad reza haddadi ² ( Assistant professor of Mathematices, University of Ayatollah Borujerdi, Borujerd, Iran )
younes nademi ³ ( Assistant professor of Economics, University of Ayatollah Borujerdi, Borujerd, Iran )

Received: 2018-01-16 Accepted : 2018-05-23 Published : 2020-04-20

Keywords: OPEC Crude Oil Market, Weak Form Efficiency Hypothesis, Markov Regime Switching GARCH model,

Abstract :

Crude oil is a strategic commodity that has been one of the largest commodity market over the past 40 years in the world. The main players in the market, such as manufacturers, financial institutions and individual traders are interested in recognizing and benefiting from some moving trends and practices in oil prices and returns. A market where prices always and fully reflect information is called efficient. Thus, there are 3 types of market efficiencies: weak form, semi strong form and strong form efficiency. In research, the weak form efficiency is often tested. In this study, the weak form efficiency of the OPEC crude oil market for daily data during the period from 4 January 2010 to 29 December 2017 by the two mode Markov regime switching GARCH model has been examined and the results of the estimation indicate a lack of efficiency in both high and low volatile regimes of the crude oil market.

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