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Regime-dependent adjustment in energy spot and futures markets

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  • Beckmann, Joscha
  • Belke, Ansgar
  • Czudaj, Robert

Abstract

This paper analyzes the relationship between the spot and futures prices of energy commodities from a new perspective. Taking data from the Dow Jones UBS Commodity Index, we first test for a long-run relationship between spot and futures prices. As a second step, smooth transition models are fitted to examine whether the adjustment of spot returns to the forward premium follows a nonlinear path. Although the findings show that the informational content of futures prices varies between different commodities, a similar pattern arises in all of them: the predictive power of futures prices can be observed only if previous volatility or the basis has been low, while no relationship arises if both have previously been high. Hence, past relative volatility is important for the present price discovery function.

Suggested Citation

  • Beckmann, Joscha & Belke, Ansgar & Czudaj, Robert, 2014. "Regime-dependent adjustment in energy spot and futures markets," Economic Modelling, Elsevier, vol. 40(C), pages 400-409.
  • Handle: RePEc:eee:ecmode:v:40:y:2014:i:c:p:400-409
    DOI: 10.1016/j.econmod.2013.12.026
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    Cited by:

    1. Beckmann, Joscha & Berger, Theo & Czudaj, Robert, 2015. "Does gold act as a hedge or a safe haven for stocks? A smooth transition approach," Economic Modelling, Elsevier, vol. 48(C), pages 16-24.
    2. Robert Czudaj, 2019. "Crude oil futures trading and uncertainty," Chemnitz Economic Papers 027, Department of Economics, Chemnitz University of Technology, revised Jan 2019.
    3. repec:eee:eneeco:v:71:y:2018:i:c:p:282-301 is not listed on IDEAS
    4. repec:gam:jsusta:v:11:y:2019:i:5:p:1359-:d:211007 is not listed on IDEAS
    5. Chang, Chun-Ping & Lee, Chien-Chiang, 2015. "Do oil spot and futures prices move together?," Energy Economics, Elsevier, vol. 50(C), pages 379-390.
    6. repec:spr:qualqt:v:52:y:2018:i:3:d:10.1007_s11135-017-0506-7 is not listed on IDEAS
    7. repec:eee:ecmode:v:70:y:2018:i:c:p:97-114 is not listed on IDEAS
    8. repec:eee:riibaf:v:47:y:2019:i:c:p:600-615 is not listed on IDEAS
    9. repec:eee:eneeco:v:69:y:2018:i:c:p:185-195 is not listed on IDEAS
    10. Shahbaz, Muhammad & Zakaria, Muhammad & Shahzad, Syed Jawad Hussain & Mahalik, Mantu Kumar, 2018. "The energy consumption and economic growth nexus in top ten energy-consuming countries: Fresh evidence from using the quantile-on-quantile approach," Energy Economics, Elsevier, vol. 71(C), pages 282-301.

    More about this item

    Keywords

    Energy; Cointegration; Commodities; Spot and futures markets; Smooth transition regression;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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