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Price discovery in energy markets

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  • Shrestha, Keshab

Abstract

In this study, we empirically analyze the price discovery process in the futures and spot markets for crude oil, heating oil and natural gas using daily closing prices. We use two different information share measures that are based on the methods proposed by Gonzalo and Granger (1995) and Lien and Shrestha (2014). Both measures indicate that almost all the price discovery takes place in the futures markets for the heating oil and natural gas. However, for the crude oil, the price discovery takes place both in the futures and spot markets. As a whole, our study indicates that futures markets play an important role in the price discovery process.

Suggested Citation

  • Shrestha, Keshab, 2014. "Price discovery in energy markets," Energy Economics, Elsevier, vol. 45(C), pages 229-233.
    • Handle: RePEc:eee:eneeco:v:45:y:2014:i:c:p:229-233
    DOI: 10.1016/j.eneco.2014.06.007
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    More about this item

    Keywords

    Unit root; Cointegration; Price discovery; Energy futures;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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