TY  - JOUR
AU  - Esunge, Julius N. 
AU  - Snyder-Beattie, Andrew 
PY  - 2011
TI  - Dissecting Two Approaches to Energy Prices
JF  - Journal of Mathematics and Statistics
VL  - 7
IS  - 2
DO  - 10.3844/jmssp.2011.98.102
UR  - https://thescipub.com/abstract/jmssp.2011.98.102
AB  - Problem statement: This research tested the viability of Geometric Brownian Motion as a
stochastic model of oil prices. Approach: Using autoregressions and unit root tests, we determined
that oil prices tend not to exhibit the Markov Property and thus GBM may be a problematic model.
Results: Instead, oil prices seem to be mean reverting over the long run, possibly following an
Ornstein-Uhlenbeck process. Conclusion/Recommendations: To determine whether or not OPEC
was the cause of mean reversion, we repeated the tests after controlling for quotas, only to find the
same results did not apply over the short run.