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Research on Multifractal Characteristics of Oil Futures Market and Its Relevant Problems

Author: ChenHongTao
Tutor: ZhouDeQun
School: Nanjing University of Aeronautics and Astronautics
Course: Management Science and Engineering
Keywords: PetroFinance oil price petroleum futures multifractal spectrum price discovery spillover effects
CLC: F713.35;F416.22
Type: PhD thesis
Year: 2009
Downloads: 512
Quote: 2
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Abstract


Coincident with the mutual penetrate and combination of oil and finance markets has been a growing prominence of the quasi-finance product feature of oil. Therefore the oil issue has been upgraded to the equivalence of national finance and economy security. In essence, national oil security has transformed from the“supply security”model of“production - supply”type to the“price- security”model of“trade - finance”type. The core issue of national oil strategic security has less to do with the oil productivity of a country than it does with the guarantee of oil supply at a reasonable price.China is one of the largest oil-producing and consuming countries in the world. In 2007, although oil output in China is up to 1.87 billion tons which ranked fifth in the world, it is far from enough to meet domestic demand. Since 2003, oil consumption in China has exceeded that in Japan and, become the second largest oil consumer next to the United States in the world with daily consumption reaching to 0.546 million barrels. Since 1993, China has grown into a net import country of oil due to vast import of crude oil and product oil. The oil trade gap increases swiftly and violently from 0.34 million tons in 1994 to 1.87 billion tons in 2007, with an increase 54 times within tens of years. Nowadays, China has become the third largest oil importing country, whose external dependence degree has been up to 45%. Whereas China doesn’t have a mature oil pricing market now, oil price of which absolutely depends on overseas market. Frequent fluctuation of international oil price poses a threat to energy and finance security of China. Based on such background, this paper presents a theoretical study of petrofinance and an empirical study about efficiencies of oil future markets, in order to promote the development of petrofinance discipline and provide a reference decision-making for formulating related petrofinance strategies. The main innovations and researches are as follows:The main innovations and researches are as follows:(1) The concept of PetroFinance, an interdiscipline, is put forward, that is PetroFinance is a discipline to study various finance phenomenon taking place in petroleum economic system and their own finance law using the fundamental theory of finance and Petroleum Economics. Discipline definition, research object, research content, as well as research methods of its branches are set forth respectively, included Petrofinance Markets, Corporate Petrofinance, Petrofinance Engineering, Petrofinance Econometrics and Petroleum Currency. The theory of Petroleum Futures Market, Petrodollars and Petroleum Exchange Rates, the law of fluctuations in Petroleum price, the possible research in the future are mainly introduced. (2) Aiming at the price return rate series of WTI crude oil futures in New York Mercantile Exchange(NYMEX), Brent crude oil futures in International Petroleum Exchange(IPE) and 180cst fuel oil futures in Singapore and Shanghai Futures Exchange(SHFE), the author proves that there are significant Multifractal characteristic in oil future price system using Multifractal Detrended Fluctuation Analysis(MF-DFA). Along with the order q changing, the Generalized Hurst index of WTI crude oil futures prices sequence decreases from 0.8625 to 0.3097, and similar characteristics exit in other oil futures markets.(3) Applying characteristic parameters of Multifractal Spectrum, this paper depicts multifractal characteristic of crude oil and fuel oil futures price system. Partition Function Testing shows that oil future price series are no of characteristic length with scale invariance. Generalized Rényi Dimension is the monotone decreasing function of order which has the same limit with Singularity Exponent. It shows that oil price system doesn’t have fixed dimension and support the R / S or V / S analysis. From the perspective of Multifractal Spectrum, future price low level events play a leading role with a fallback in the process of price increasing in the early days of oil future market. But later, future price high level events take the dominant position instead, and future price keeps rising.(4) The price discovery function of oil future and spot markets in the United States, Britain and China is investigated using Error Correction Model, Variance Decomposition, Garbade-Sillber and so on based on sample data from 1987 to 2008. The empirical results indicate that price discovery function of WTI crude oil future market is the most powerful, next is Brent crude oil, 180cst fuel oil of China ranks the last. The fluctuation variances of fuel oil future and spot price in China are from themselves which shows casual relationship between future and spot markets isn’t obvious.(5) Based on Grey Relativity Theory, Information Spillover Effects among oil future markets of different countries are investigated, and the concrete time difference of price fluctuations in Chinese and foreign future markets are calculated. The results demonstrate that oil price in China is about 2~3 days behind that in the United States, 15 days behind that in Britain, 11~14 days behind that in Japan. Chinese oil prices and Brent crude oil prices have the highest correlation, gray correlation as high as 0.799908.

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CLC: > Economic > Industrial economy > The world's industrial economy > Industrial sector economy > Energy industry,power industry > Oil and gas industry
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