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On the relationship between forward energy prices: a panel data cointegration approach

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  • Marc Joëts

Abstract

The aim of this paper is to investigate the long-term relationship between the forward prices of crude oil and domestic fuel (FOD) on the period from August 2003 to April 2010. To this end, we rely on a panel data setting by considering a sample of 36 maturities for the forward prices. Using panel cointegration tests, our results show that oil and fuel prices are characterized by a strong homogeneous long-term equilibrium relationship for several maturities. Estimating a panel error correction model, we find that FOD prices are influenced by oil prices variations on both the short and the long run. The existence of a unique equilibrium model for all maturities may have important implications for financial arbitrage strategies based on energy prices relationships.

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File URL: http://economix.fr/pdf/dt/2010/WP_EcoX_2010-21.pdf
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Bibliographic Info

Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2010-21.

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Length: 8 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:drm:wpaper:2010-21

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Keywords: forward energy prices; oil; domestic fuel; panel cointegration;

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Cited by:
  1. Joëts, Marc & Mignon, Valérie, 2012. "On the link between forward energy prices: A nonlinear panel cointegration approach," Energy Economics, Elsevier, vol. 34(4), pages 1170-1175.

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