International Economics

<< N°129

Issue Q1 2012  
Crude oil market efficiency: An empirical investigation via the Shannon entropy  
Walid Mensi
Chaker Alaoui
Khuong Nguyen
This paper evaluates the time-varying degrees of weak-form efficiency of the crude oil markets using the Modified Shannon Entropy (MSE) and the Symbolic Time Series Analysis (STSA) approach. Using daily data from May 20, 1987 to March 6, 2012 for two worldwide crude oil benchmarks (West Texas Intermediate and Europe Brent), our findings reveal that the weak-form market efficiency of two oil markets evolves through time, but with different time trends. Moreover, the WTI market appears to be less efficient than the Europe Brent. These results have several implications for commodity portfolio hedgers and policymakers. Abstract

Oil Prices ; Information Theory ; Shannon Entropy ; Market Efficiency ; Keywords
G14 ; G15 ; C87 ; JEL classification
Order form