Small trends and big cycles in crude oil prices

Xiaoyi Mu (Lead / Corresponding author), Haichun Ye

    Research output: Contribution to journalArticlepeer-review

    8 Citations (Scopus)


    We employ an unobserved components model to disentangle the long-term trend from cyclical movements in the price of internationally traded crude oil using data from 1861 to 2010. The in-sample estimation of the model identifies a deterministic quadratic trend and two types of cycles, with the short cycle having a period of 6 years and the long cycle of 29 years. Compared to the large amplitude of the cycles, the growth rate of the long-term trend is small. The out-of-sample forecasting performance of various competing models is compared to that of a "no change" random walk forecast. While the random walk forecast tends to be the most accurate at shorter horizons, it is outperformed by the trend-cycle models at horizons longer than one year. The results provide evidence of predictability in the price of crude oil at long horizons.
    Original languageEnglish
    Pages (from-to)49-72
    Number of pages24
    JournalEnergy Journal
    Issue number1
    Publication statusPublished - 1 Jan 2015


    • Cycle
    • Forecast
    • Oil price
    • Trend
    • Unobserved components model

    ASJC Scopus subject areas

    • General Energy
    • Economics and Econometrics


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