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Information content of the limit order book for crude oil futures price volatility

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  • Tian, Xiao
  • Duong, Huu Nhan
  • Kalev, Petko S.

Abstract

This paper investigates the information content of the limit order book on future volatility in the crude oil futures market. We propose a time-weighted limit order book slope that incorporates the duration of each bid and ask update. When volatility is expected to increase around weekly announcements on physical crude oil inventory, we observe that the limit order book slope decreases significantly. We also show that the time-weighted limit order book slope is informative about price volatility one day ahead. Overall, our findings illustrate the importance of the limit order book as a conduit for volatility information.

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  • Tian, Xiao & Duong, Huu Nhan & Kalev, Petko S., 2019. "Information content of the limit order book for crude oil futures price volatility," Energy Economics, Elsevier, vol. 81(C), pages 584-597.
    • Handle: RePEc:eee:eneeco:v:81:y:2019:i:c:p:584-597
    DOI: 10.1016/j.eneco.2019.04.026
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    1. Alexandre Aidov & Olesya Lobanova, 2021. "Volatility and Depth in Commodity and FX Futures Markets," JRFM, MDPI, vol. 14(11), pages 1-16, November.

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    More about this item

    Keywords

    Crude oil futures; Energy market information releases; Futures price volatility; Time-weighted limit order book slope;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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