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Energy price transmissions during extreme movements

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  • Marc Joëts

Abstract

This paper investigates price transmissions across European energy forward markets at distinct maturities during both normal times and extreme fluctuation periods. To this end, we rely on the traditional Granger causality test (in mean) and its multivariate extension in tail distribution developped by Candelon, Joëts, and Tokpavi (2012). Con- sidering forward energy prices at 1, 10, 20, and 30 months, it turns out that no significant causality exists between markets at regular times whereas comovements are at play during extreme periods especially in bear markets. More precisely, energy prices comovements appear to be stronger at short horizons than at long horizons, testifying an eventual Samuelson mechanism in the maturity prices curve. Diversification strategies tend to be more efficient as maturity increases.

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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 2012-38.

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Length: 24 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:drm:wpaper:2012-38

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Related research

Keywords: Forward energy prices; Value-at-Risk (VaR); CAViaR approach; risk spillover; Granger causality;

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