M O D E L I N G O I L P R I C E S I N N A M I B I A N M A R K E T U S I N G Q U A N T I TAT I V E T E C H N I Q U E S

  • w. nangolo University of Namibia
  • r.b. gnitchogna University of Namibia,
  • f. gideon University of Namibia
  • e. lungu Botswana International University of Science and Technology,
DOI: https://doi.org/10.53555/as.v3i7.1306
Keywords: Oil Prices,, Log Returns,, Random Walk, Mean Reversion, Augmented Dickey-Fuller test,, Variance Ratio Test,, Multiple Variance Ratio Test, Ranks-Sign Test, Q-Statistic Test and Johnsen Cointegration Test.

Abstract

This paper contributes to the debate on oil prices modelling by proposing a
quantitative analysis of the dynamics of nominal oil prices in Namibia. The
study carries out a post assessment and validation of Random Walk and
Mean Reversion processes in modelling and forecasting futures dynamics
of nominal oil prices . In this regard, the study used data from the Namibian
oil market from April 1989 to April 2014. In essence, despite the recent
trends of computational and VAR models for nominal oil prices, modelling
and forecasting efforts have circumscribed random walks or mean reversion
models as viable options. Popular baseline and benchmark models include
Random Walk, Random Walk with drift, AR, MA, ARMA models. The
study investigates the suitability of the models in capturing and predicting
the data behaviours. Analysis are conducted on chosen sub-period as well
as on the overall data. From our results, a major highlight is that there is
enough evidence to conclude that oil nominal prices in Namibia are indeed
stationary and therefore suitable for analysis. The results also indicated an
increasing stochastic trend that confirms that oil prices behave randomly at
times. Summary analysis pointing to the fact that oil prices are mean reverting
with occurrences of random walk.

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Author Biographies

w. nangolo, University of Namibia

Department of Mathematics,

r.b. gnitchogna, University of Namibia,

Department of Mathematics,

f. gideon, University of Namibia

Department of Mathematics

e. lungu, Botswana International University of Science and Technology,

Department of Mathematics

Published
2017-07-31
How to Cite
nangolo, w., gnitchogna, r.b., gideon, f., & lungu, e. (2017). M O D E L I N G O I L P R I C E S I N N A M I B I A N M A R K E T U S I N G Q U A N T I TAT I V E T E C H N I Q U E S. IJRDO-Journal of Applied Science, 3(7), 12-36. https://doi.org/10.53555/as.v3i7.1306
Issue
Vol. 3 No. 7 (2017): IJRDO - Journal of Applied Science
Section
Articles

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