The Time-Dependent Lead-Lag Relationship Between WTI and Brent Crude Oil Spot Markets
Based on daily returns, we comprehensively characterize the lead-lag relationship between Brent and WTI crude oil spot markets from 1987 to 2017 with the non-parametric symmetric thermal optimal path (TOPS) method. The empirical results indicate that WTI spot price leads Brent spot price slightly, w...
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| Format: | Article |
| Language: | English |
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Frontiers Media S.A.
2020-04-01
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| Series: | Frontiers in Physics |
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| Online Access: | https://www.frontiersin.org/article/10.3389/fphy.2020.00132/full |
| _version_ | 1817995102268686336 |
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| author | Yanhong Yang Yinghui Shao Haolin Shao Haolin Shao Xin Song |
| author_facet | Yanhong Yang Yinghui Shao Haolin Shao Haolin Shao Xin Song |
| author_sort | Yanhong Yang |
| collection | DOAJ |
| description | Based on daily returns, we comprehensively characterize the lead-lag relationship between Brent and WTI crude oil spot markets from 1987 to 2017 with the non-parametric symmetric thermal optimal path (TOPS) method. The empirical results indicate that WTI spot price leads Brent spot price slightly, which provides support to the price leadership of WTI over Brent. However, the lead-lag relationship is volatile and sensitive to extreme events like geopolitical conflict and policy shift. Due to the concerns about future oil supply triggered by the two Gulf wars, both WTI and Brent experienced extreme uncertainty and co-moved closely during wartime. Notably, the TOPS method captures the structural break in the WTI-Brent price spread in 2011 which is influenced by the U.S. oil export ban and transportation bottleneck. After the lift of the ban, the two benchmark prices have reconnected. The lead-lag signals basically coincide with major influential changes in the oil markets, which suggests that the TOPS method provides a viable approach to reflecting the impact of extreme events on the crude oil prices motion. |
| first_indexed | 2024-04-14T02:01:07Z |
| format | Article |
| id | doaj.art-2456a1c68e0e4396a365ae8a258c1507 |
| institution | Directory Open Access Journal |
| issn | 2296-424X |
| language | English |
| last_indexed | 2024-04-14T02:01:07Z |
| publishDate | 2020-04-01 |
| publisher | Frontiers Media S.A. |
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| series | Frontiers in Physics |
| spelling | doaj.art-2456a1c68e0e4396a365ae8a258c15072022-12-22T02:18:49ZengFrontiers Media S.A.Frontiers in Physics2296-424X2020-04-01810.3389/fphy.2020.00132528263The Time-Dependent Lead-Lag Relationship Between WTI and Brent Crude Oil Spot MarketsYanhong Yang0Yinghui Shao1Haolin Shao2Haolin Shao3Xin Song4Faculty of Education, East China Normal University, Shanghai, ChinaSchool of Statistics and Information, Shanghai University of International Business and Economics, Shanghai, ChinaDepartment of Statistics, Graduate School of Arts and Sciences, Columbia University, New York, NY, United StatesSchool of Entrepreneurship and Management, Shanghaitech University, Shanghai, ChinaBusiness School, University of Shanghai for Science and Technology, Shanghai, ChinaBased on daily returns, we comprehensively characterize the lead-lag relationship between Brent and WTI crude oil spot markets from 1987 to 2017 with the non-parametric symmetric thermal optimal path (TOPS) method. The empirical results indicate that WTI spot price leads Brent spot price slightly, which provides support to the price leadership of WTI over Brent. However, the lead-lag relationship is volatile and sensitive to extreme events like geopolitical conflict and policy shift. Due to the concerns about future oil supply triggered by the two Gulf wars, both WTI and Brent experienced extreme uncertainty and co-moved closely during wartime. Notably, the TOPS method captures the structural break in the WTI-Brent price spread in 2011 which is influenced by the U.S. oil export ban and transportation bottleneck. After the lift of the ban, the two benchmark prices have reconnected. The lead-lag signals basically coincide with major influential changes in the oil markets, which suggests that the TOPS method provides a viable approach to reflecting the impact of extreme events on the crude oil prices motion.https://www.frontiersin.org/article/10.3389/fphy.2020.00132/fulloil pricesspot marketlead-lag relationshipsymmetric thermal optimal pathWTIBrent |
| spellingShingle | Yanhong Yang Yinghui Shao Haolin Shao Haolin Shao Xin Song The Time-Dependent Lead-Lag Relationship Between WTI and Brent Crude Oil Spot Markets Frontiers in Physics oil prices spot market lead-lag relationship symmetric thermal optimal path WTI Brent |
| title | The Time-Dependent Lead-Lag Relationship Between WTI and Brent Crude Oil Spot Markets |
| title_full | The Time-Dependent Lead-Lag Relationship Between WTI and Brent Crude Oil Spot Markets |
| title_fullStr | The Time-Dependent Lead-Lag Relationship Between WTI and Brent Crude Oil Spot Markets |
| title_full_unstemmed | The Time-Dependent Lead-Lag Relationship Between WTI and Brent Crude Oil Spot Markets |
| title_short | The Time-Dependent Lead-Lag Relationship Between WTI and Brent Crude Oil Spot Markets |
| title_sort | time dependent lead lag relationship between wti and brent crude oil spot markets |
| topic | oil prices spot market lead-lag relationship symmetric thermal optimal path WTI Brent |
| url | https://www.frontiersin.org/article/10.3389/fphy.2020.00132/full |
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