Causality Between Market Liquidity and Depth for Energy and Grains
AbstractThis paper examines the roles of futures prices of crude oil, gasoline, ethanol, corn, soybeans and sugar in the energy-grain nexus. It also investigates the own- and cross-market impacts for lagged grain trading volume and open interest in the energy and grain markets. According to the results, the conventional view, for which the impacts are from oil to gasoline to ethanol to grains in the energy-grain nexus, does not hold well in the long run because the oil price is influenced by gasoline, soybeans and oil. Moreover, gasoline is preceded by only the oil price and ethanol is not foreshadowed by any of the prices. However, in the short run, two-way feedback in both directions exists in all markets. The grain trading volume effect across oil and gasoline is more pronounced in the short run than the long run, satisfying both the overconfidence/disposition and new information hypotheses across markets. The results for the ethanol open interest shows that money flows out of this market in both the short and long run, but no results suggest across market inflows or outflows to the other grain markets.
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Bibliographic InfoPaper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 769.
Date of creation: Apr 2011
Date of revision:
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Postal: Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501
Web page: http://www.kier.kyoto-u.ac.jp/eng/index.html
More information through EDIRC
Causality; market liquidity; depth; energy; grains.;
Other versions of this item:
- Sari, Ramazan & Hammoudeh, Shawkat & Chang, Chia-Lin & McAleer, Michael, 2012. "Causality between market liquidity and depth for energy and grains," Energy Economics, Elsevier, vol. 34(5), pages 1683-1692.
- Sari, S. & Hammoudeh, S.M. & Chang, C-L. & McAleer, M.J., 2011. "Causality Between Market Liquidity and Depth for Energy and Grains," Econometric Institute Report EI 2011-14, Erasmus University Rotterdam, Econometric Institute.
- Ramazan Sari & Shawkat Hammoudeh & Chia-Lin Chang & Michael McAleer, 2011. "Causality Between Market Liquidity and Depth for Energy and Grains," Documentos del Instituto Complutense de AnÃ¡lisis EconÃ³mico 2011-10, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
- Ramazan Sari & Shawkat Hammoudeh & Chia-Lin Chang & Michael McAleer, 2011. "Causality Between Market Liquidity and Depth for Energy and Grains," Working Papers in Economics 11/15, University of Canterbury, Department of Economics and Finance.
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-04-30 (Agricultural Economics)
- NEP-ALL-2011-04-30 (All new papers)
- NEP-ENE-2011-04-30 (Energy Economics)
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