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Price Discontinuities in Energy Spot and Futures Prices

Author

Listed:
  • Svetlana Maslyuka
  • Kristian Rotarub
  • Alexander Dokumentovc

Abstract

How often do jumps or price discontinuities occur on energy markets? What is the dynamics of the energy market sentiment (based on media coverage of economic fundamentals and other news events) that influence market behavior? How does the market sentiment affect the commodity returns? This study answers these questions by first, investigating jumping behavior of daily energy spot and nearest month futures returns for crude oil, natural gas, gasoline, heating oil and propane and second, by proposing a novel Cumulative Sentiment Index applied to the analysis of the detected jumps in returns. Our findings confirm previous studies that jumps are the common feature for all energy commodities studied. For some commodities such as gasoline spot and futures and heating oil futures, the average number of jumps per year has increased after the start of the Global Financial Crisis.

Suggested Citation

  • Svetlana Maslyuka & Kristian Rotarub & Alexander Dokumentovc, 2013. "Price Discontinuities in Energy Spot and Futures Prices," Monash Economics Working Papers 33-13, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2013-33
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2013/index.html
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    Cited by:

    1. Cummins, Mark & Kiely, Greg & Murphy, Bernard, 2018. "Gas storage valuation under multifactor Lévy processes," Journal of Banking & Finance, Elsevier, vol. 95(C), pages 167-184.

    More about this item

    Keywords

    jumps; energy prices; sentiment; nonparametric tests;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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