Are oil and gas futures markets efficient? A multifractal analysis

Abstract

Energy futures markets have shown high volatility, giving rise to challenges regarding their pricing and efficiency. This study investigates the weak-form efficiency hypothesis for two major energy futures markets (gas and oil) over both calm and crisis periods, using a multifractal approach and intraday data to deal with the flexible econometric framework and rich information. Our results are threefold. First, we show that multifractality in lower frequency might be more biased than in intraday data, which motivates the use of the fractal approach when testing the intraday efficiency. Second, we highlight that high frequency data are characterized by a true long memory with a higher degree of persistence during the post-crisis period for the oil market. However, for lower frequencies, the long memory becomes spurious for both markets. Finally, our forecasting results show that, for the oil market, the proposed multifractal approach outperforms conventional methodologies, especially during turmoil periods.

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