Time-Varying Long Memory Hurst Parameter Evaluations of the WTI Crude Oil Market
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Abstract
This study investigates the time-varying long memory in returns and volatility within the West Texas Intermediate (WTI) crude oil market. The period under study includes the COVID-19 pandemic and the Ukraine-Russia conflict. The long memory observed in crude oil markets can be attributed to trading activities across various investment durations. During global crises, extreme price declines and heightened selling pressure often prompt long-term investors to shift their focus toward short-term investments. These sudden shifts significantly increase the prevalence of short-term investment horizons. As a result, market participants become more homogeneous, and this behavior induces strong dependencies in both the return and volatility series of the crude oil market. This study employs rescaled range analysis, aggregated variance methods, and the periodogram method to capture the long memory and informational efficiency dynamics of the WTI market. The empirical results indicate that WTI returns tend to follow a random walk, while volatility exhibits long memory.
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