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A re-examination of maturity effect of energy futures price from the perspective of stochastic volatility

Listed author(s):
  • Liu, Wei-han
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    This paper selects stochastic volatility (SV) as the uncertainty or volatility measure to re-examine the Samuelson hypothesis of maturity effect (SHME) (Samuelson, 1965). Stochastic dominance is used to examine whether the stochastic volatility level dominates with respect to maturity. The empirical analyses of energy-futures price series generally provide mild support for this hypothesis in terms of the first two degrees of stochastic dominance. Each type of futures has its own properties with respect to the maturity effect. SV levels play a role in determining the testing outcome. The hypothesis is more likely to hold at low SV levels. The higher the volatility level, the less likely the SHME will hold because SV surges to its peak level regardless of maturity.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0140988316300767
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    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 56 (2016)
    Issue (Month): C ()
    Pages: 351-362

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    Handle: RePEc:eee:eneeco:v:56:y:2016:i:c:p:351-362
    DOI: 10.1016/j.eneco.2016.03.026
    Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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