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Multifractal Detrended Cross-Correlation Analysis of the Spot Markets of the International Crude Oil and US Dollar Index

Jing Zhang, Hong-Yong Wang

Abstract



In this paper we choose the spot prices of the International Brent crude oil ( WTI crude oil and Brent crude oil ) and the US dollar indexes as the research objects to discuss their cross-correlation relationships. First we qualitatively describe the cross-correlation relationships between the return series of the International Brent crude oil markets and the US dollar indexes by using the cross-correlation teest statistics and the cross-correlation coefficients to show that each pair of time series ( WTI and Brent, 、WTI and USDX, 、Brent and USDX )the cross-correlation exponent disobeys normal distribution. Then quantitative analyses for the cross-correlations and the auto-correlations of each pair of time series ( WTI and Brent, 、WTI and USDX, 、Brent and USDX )the cross-correlation exponent are made by multifractal methods. It is confirmed that both the cross-correlations and the auto-correlations all have the multifractal characteristics. Finally, the causes of the multifractality are investigated and it is pointed out that both the long-range correlations and the fat-tail distributions all play important roles in the contributions of multifractality.

Keywords


WTI crude oil, Brent Brent crude oil, US dollar index, cross-correlations, multifractal analysis.

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