Lithium industry Betas Dependence Wavelets Fractional integration
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Monge, M. (Manuel); Gil-Alana, L.A. (Luis A.). "The lithium industry and analysis of the beta term structure of oil companies". Risks. 8 (4), 2020, 130
According to a statement made in the BP Energy Outlook report in 2017, most of the world’s
liquid fuel (petroleum) is being consumed by the transportation industry. The mechanisms used
to stimulate changes in the energy markets are affected by government policies that act in more
ambitious ways than purely market-driven forces; different governments have promoted incentives
involving electric mobility, especially in urban areas. The substitution for crude oil by renewable
energy inputs in the transport sector is a major concern for oil producers. Among the different types
of clean energies, lithium (Li) is currently assuming an increasingly strategic role. The goals of this
paper are two-fold: First, we study the dynamics of the lithium industry and then the beta risk
behavior of the 10 largest oil companies in the world for the time period between 11 February 2008
and 10 January 2019. We use an approach based on the continuous wavelet transform (CWT) method.
The results indicate that there is a period of dependence between late 2013 and 2016 that occurs in the
long-run frequencies of between 32 and 198 days for all cases, except for in the case of PetroChina,
thereby demonstrating that the beta term is time-varying. We also find evidence that the beta term
reflects and advances oil companies’ responsiveness to movements in the lithium market. In the
second part of the paper, we study the dynamics of the beta series by using long-run dependence
approaches. The results indicate that the betas are highly persistent, with the order of integration
found to be significantly above 1 in all cases.