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Investigating the price discovery and risk transfer functions in the crude oil and gasoline futures markets: Some empirical evidence

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  • Zhang, Yue-Jun
  • Wang, Zi-Yi

Abstract

This paper empirically investigates the functions of price discovery and risk transfer in crude oil and gasoline futures markets using some econometric models. And the results indicate that, first, 95.71% and 59.41% of the price discovery function is performed by futures in crude oil and gasoline markets respectively during the sample period, implying the greater contribution of the futures markets compared with that of the spot markets. Meanwhile, the gasoline futures price makes 85.71% contribution to price discovery in its interaction with crude oil futures price. Second, crude oil futures price performs the risk transfer function much better than gasoline futures price in interactions with their respective spot prices. And the risk transfer function between crude oil and gasoline futures markets is not well performed. Finally, the recent financial crisis has not significantly influenced the price discovery and risk transfer functions between crude oil and gasoline futures markets.

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  • Zhang, Yue-Jun & Wang, Zi-Yi, 2013. "Investigating the price discovery and risk transfer functions in the crude oil and gasoline futures markets: Some empirical evidence," Applied Energy, Elsevier, vol. 104(C), pages 220-228.
  • Handle: RePEc:eee:appene:v:104:y:2013:i:c:p:220-228
    DOI: 10.1016/j.apenergy.2012.10.066
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    3. Hongtao Chen & Lianghua Chen, 2015. "Multifractal spectrum analysis of Brent crude oil futures prices volatility in intercontinental exchange," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 38(1/2/3), pages 93-108.
    4. Ju, Keyi & Zhou, Dequn & Zhou, P. & Wu, Junmin, 2014. "Macroeconomic effects of oil price shocks in China: An empirical study based on Hilbert–Huang transform and event study," Applied Energy, Elsevier, vol. 136(C), pages 1053-1066.
    5. Ghassan, Hassan Belkacem & AlHajhoj, Hassan Rafdan, 2016. "Long run dynamic volatilities between OPEC and non-OPEC crude oil prices," Applied Energy, Elsevier, vol. 169(C), pages 384-394.
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    8. Huang, Xuan & An, Haizhong & Fang, Wei & Gao, Xiangyun & Wang, Lijun & Sun, Xiaoqi, 2016. "Impact assessment of international anti-dumping events on synchronization and comovement of the Chinese photovoltaic stocks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 459-469.
    9. Pal, Debdatta & Mitra, Subrata K., 2016. "Asymmetric oil product pricing in India: Evidence from a multiple threshold nonlinear ARDL model," Economic Modelling, Elsevier, vol. 59(C), pages 314-328.
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    11. Cong Guan & Gerasimos Theotokatos & Hui Chen, 2015. "Analysis of Two Stroke Marine Diesel Engine Operation Including Turbocharger Cut-Out by Using a Zero-Dimensional Model," Energies, MDPI, Open Access Journal, vol. 8(6), pages 1-27, June.
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    14. Baldi, Francesco & Theotokatos, Gerasimos & Andersson, Karin, 2015. "Development of a combined mean value–zero dimensional model and application for a large marine four-stroke Diesel engine simulation," Applied Energy, Elsevier, vol. 154(C), pages 402-415.
    15. Ju, Keyi & Su, Bin & Zhou, Dequn & Zhang, Yuqiang, 2016. "An incentive-oriented early warning system for predicting the co-movements between oil price shocks and macroeconomy," Applied Energy, Elsevier, vol. 163(C), pages 452-463.
    16. An, Haizhong & Gao, Xiangyun & Fang, Wei & Ding, Yinghui & Zhong, Weiqiong, 2014. "Research on patterns in the fluctuation of the co-movement between crude oil futures and spot prices: A complex network approach," Applied Energy, Elsevier, vol. 136(C), pages 1067-1075.
    17. Wu, Gang & Zhang, Yue-Jun, 2014. "Does China factor matter? An econometric analysis of international crude oil prices," Energy Policy, Elsevier, vol. 72(C), pages 78-86.
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    20. Zhi-Hong Han & Sheng Yang & Mu-Ling Chen & Ling-Yun He, 2015. "Mean spillover effect between crude oil and gasoline markets: an empirical result," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 38(1/2/3), pages 49-68.
    21. Fan, Liwei & Pan, Sijia & Li, Zimin & Li, Huiping, 2016. "An ICA-based support vector regression scheme for forecasting crude oil prices," Technological Forecasting and Social Change, Elsevier, vol. 112(C), pages 245-253.

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