Power Laws and Bubbles in Oil Prices

8 Pages Posted: 19 Oct 2017

See all articles by David Seamans

David Seamans

Calvin Blackwell

College of Charleston - School of Business

Date Written: October 18, 2017

Abstract

We analyzed power law (Pareto) distributions of one-minute oil prices through the US Oil Fund (Ticker symbol USO), from January 1 through March 31, 2011. Using the daily power law exponent, α, we determined a critical value which predicted a price trend reversal. This critical value, estimated to be 1.2, may be related to extreme volatility. As the daily α crossed the critical value, the daily percent change of the USO reversed. These crossovers were used to trigger Buy and Sell signals that would have resulted in a 15% return on investment over the study period.

Keywords: Power law, Pareto Distribution, Oil

JEL Classification: G01, G02, G13

Suggested Citation

Seamans, David and Blackwell, Calvin, Power Laws and Bubbles in Oil Prices (October 18, 2017). Available at SSRN: https://ssrn.com/abstract=3055409 or http://dx.doi.org/10.2139/ssrn.3055409

Calvin Blackwell (Contact Author)

College of Charleston - School of Business ( email )

Department of Economics
66 George Street
Charleston, SC 29424
United States
843-953-7836 (Phone)
843-953-5697 (Fax)

No contact information is available for David Seamans

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