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News sentiment and jumps in energy spot and futures markets

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  • Maslyuk-Escobedo, Svetlana
  • Rotaru, Kristian
  • Dokumentov, Alexander

Abstract

How often do price discontinuities occur on spot and futures energy markets? What are their core characteristics in terms of incidence, size, and direction? Are price discontinuities in energy commodities related to large swings in market sentiment? Our study answers these questions by investigating the jump incidence of daily energy spot and nearest month futures returns for crude oil, natural gas, gasoline, heating oil and propane using formal nonparametric jump detection procedure for the period January 2003 to May 2013. This study proposes a proxy for aggregate and individual energy market sentiment reflecting the dynamics of news associated with the energy sector and a variety of distinct energy markets. Our analysis demonstrates that the greatest frequency of jumps occurred in spot markets as well as in crude oil and natural gas sentiment indices. The study identifies several types of co-jumps: between spot and futures pairs of energy commodities; across energy commodities; and between energy markets and relevant sentiment indices. Regarding the latter, the study discovers a statistically and practically significant dependency of jumps in corresponding energy commodity prices from the crude oil and aggregate sentiment indices introduced in this study.

Suggested Citation

  • Maslyuk-Escobedo, Svetlana & Rotaru, Kristian & Dokumentov, Alexander, 2017. "News sentiment and jumps in energy spot and futures markets," Pacific-Basin Finance Journal, Elsevier, vol. 45(C), pages 186-210.
  • Handle: RePEc:eee:pacfin:v:45:y:2017:i:c:p:186-210
    DOI: 10.1016/j.pacfin.2016.07.001
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    References listed on IDEAS

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    1. repec:eee:eneeco:v:77:y:2019:i:c:p:34-45 is not listed on IDEAS
    2. repec:wly:jfutmk:v:39:y:2019:i:7:p:818-837 is not listed on IDEAS

    More about this item

    Keywords

    Jumps; Energy prices; Sentiment; Sentiment index; Nonparametric tests;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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