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Article

Anyssa Trimech

This paper aims to investigate the pattern of dependence between crude oil price and energy consumption of the most important economic sectors in the USA, over different…

Abstract

Purpose

This paper aims to investigate the pattern of dependence between crude oil price and energy consumption of the most important economic sectors in the USA, over different time periods, using monthly data set from January 1986 to July 2014 and a comparative study between linear correlation versus copula correlation as a measure of dependence over the single scale and the multiscale analysis.

Design/methodology/approach

The proposed method is based on the multiresolution analysis which gives more extensive and detailed description of the dependence price-consumption pattern over different periods of time.

Findings

The empirical results show that the dependence between variables is strongly sensitive to the time varying and generally increasing with time scale. In particular, the Pearson coefficients are less than the dependence copula measures. The single-scale analysis covers many time-varying dependences which are made clear, flexible and comprehensive by the description given by the multiscale approach. It explains better the structure of relationships between variables and helps understand the variations and improve forecasts of the crude oil price and energy consumption over different time scales.

Originality/value

The proposed methodology offers the opportunity to construct dynamic management strategies by taking into account the multiscale nature of crude oil price and consumption relationship. Moreover, the paper uses wavelets as a relatively new and powerful tool for statistical analysis in addition to the copula technique that allows a new understanding of variable correlation. The paper will be of interest not only for academics in the field of data dependencies analysis but also for fund managers and market investors.

Details

International Journal of Energy Sector Management, vol. 11 no. 2
Type: Research Article
ISSN: 1750-6220

Keywords

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Article

Anyssa Trimech, Hedi Kortas, Salwa Benammou and Samir Benammou

The purpose of this paper is to discuss a multiscale pricing model for the French stock market by combining wavelet analysis and Fama‐French three‐factor model. The…

Abstract

Purpose

The purpose of this paper is to discuss a multiscale pricing model for the French stock market by combining wavelet analysis and Fama‐French three‐factor model. The objective is to examine the relationship between stock returns and Fama‐French risk factors at different time‐scales.

Design/methodology/approach

Exploiting the scale separation property inherent to the maximal overlap discrete wavelet transform, the data set are decomposed into components associated with different time‐scales. This wavelet‐based decomposition scheme allows the three Fama‐French models to be tested over different investments periods.

Findings

The obtained results show that the explanatory power of the Fama‐French three‐factor model becomes stronger as the wavelet scale increases. Besides, the relationship between the portfolio returns and the risk factors (i.e. the market, size and value factors) depends significantly upon the considered time‐horizon.

Practical implications

The proposed methodology offers investors the opportunity to construct dynamic portfolio management strategies by taking into account the multiscale nature of risk and return. Moreover, it gives a new insight to fund rating and fund selection issues in relation to heterogeneous investments periods.

Originality/value

The paper uses wavelets as a relatively new and powerful tool for statistical analysis that allows a new understanding of pricing models. The paper will be of interest not only for academics in the field of asset pricing but also for fund managers and financial market investors.

Details

The Journal of Risk Finance, vol. 10 no. 2
Type: Research Article
ISSN: 1526-5943

Keywords

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