Long Memory versus Structural Changes in the Dynamics of Europe Brent-Oil Prices

Lamouchi, Rim Ammar; Alawi, Suha Mahmoud

doi:10.21608/aja.2021.190129

	Long Memory versus Structural Changes in the Dynamics of Europe Brent-Oil Prices
المجلة العربية للإدارة
Article 21, Volume 41, Issue 3, September 2021, Pages 415-424 PDF (563.15 K)
Document Type: بحوث باللغة الإنجلیزیة
DOI: 10.21608/aja.2021.190129
Authors
Rim Ammar Lamouchi¹^{, 2}; Suha Mahmoud Alawi³
¹Department of Finance, Faculty of Economics & Administration, King Abdulaziz University, Saudi Arabia
²Ministry of Education, Tunisia, GEF-2A Laboratory, Higher Instit. of Management Tunis University, Tunisia
³Department of Finance, Faculty of Economics and Administration, King Abdulaziz University, Saudi Arabia
Abstract
In this paper, we examine the potential of long memory and structural breaks properties in the Brent returns and the Brent volatility series. We analyze the series over the period 20/05/1987-22/01/2016, using long memory tests, we demonstrate strong evidence of long-range dependence in the daily return and volatility of oil prices. From structural breaks tests, we find two structural breaks that appear in 1991 and 2008 which coincides, respectively, with the Gulf war and the global financial crisis. We use the Perron and Qu (2010) test in order to discriminate the long memory from the spurious long memory in presence of structural break, the results show strong evidence in favor of long memory. Long memory plays a crucial role in describing the oil price dynamics and we can also confirm that despite the persistence of shocks, the evolution of series is predetermined by a long memory process.
Keywords
Volatility; Fractional Integration; Long Memory Process; Spurious Long Memory; Structural Breakss

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