What are the Driving Factors behind the Fluctuation of Crude Oil Prices? : An Independent Component Analysis

Hui  Ping Li; Li Wei Fan; Peng Zhou

doi:10.4028/www.scientific.net/AMR.1073-1076.2508

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What are the Driving Factors behind the Fluctuation of Crude Oil Prices? : An Independent Component Analysis

Abstract:

This study adopted independent component analysis (ICA) to explore the underlying driving factors affect the international crude oil prices. Three original benchmark crude oil spot prices were first preprocessed to become normalized form by centering and whitening. Three independent components were then estimated by Fast-ICA algorithm. We find that the three independent components vary differently in their fluctuation amplitude and indicate clearly different hidden factors consisting of dominant long-term trend, medium-term extreme events influence, as well as frequent short-term irregular events such as weather and speculation. It shows that ICA is a powerful tool in finding out common hidden driving factors of international parallel crude oil prices.

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Periodical:

Advanced Materials Research (Volumes 1073-1076)

Pages:

2508-2511

DOI:

https://doi.org/10.4028/www.scientific.net/AMR.1073-1076.2508

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Online since:

December 2014

Authors:

Hui Ping Li*, Li Wei Fan, Peng Zhou

Keywords:

Crude Oil Price, Driving Factors, Independent Component Analysis

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