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Energy price transmissions during extreme movements

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  • Marc Joëts

Abstract

This paper investigates price transmissions across European energy forward markets at distinct maturities during both normal times and extreme fluctuation periods. To this end, we rely on the traditional Granger causality test (in mean) and its multivariate extension in tail distribution developped by Candelon, Joëts, and Tokpavi (2012). Con- sidering forward energy prices at 1, 10, 20, and 30 months, it turns out that no significant causality exists between markets at regular times whereas comovements are at play during extreme periods especially in bear markets. More precisely, energy prices comovements appear to be stronger at short horizons than at long horizons, testifying an eventual Samuelson mechanism in the maturity prices curve. Diversification strategies tend to be more efficient as maturity increases.

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  • Marc Joëts, 2012. "Energy price transmissions during extreme movements," EconomiX Working Papers 2012-38, University of Paris Nanterre, EconomiX.
  • Handle: RePEc:drm:wpaper:2012-38
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    Cited by:

    1. Joëts, Marc, 2015. "Heterogeneous beliefs, regret, and uncertainty: The role of speculation in energy price dynamics," European Journal of Operational Research, Elsevier, vol. 247(1), pages 204-215.
    2. Marc Joëts, 2013. "Heterogeneous beliefs, regret, and uncertainty: The role of speculation in energy price dynamics," Working Papers 2013-31, Department of Research, Ipag Business School.
    3. Koch, Nicolas, 2014. "Tail events: A new approach to understanding extreme energy commodity prices," Energy Economics, Elsevier, vol. 43(C), pages 195-205.
    4. Gatfaoui, Hayette, 2015. "Pricing the (European) option to switch between two energy sources: An application to crude oil and natural gas," Energy Policy, Elsevier, vol. 87(C), pages 270-283.

    More about this item

    Keywords

    Forward energy prices; Value-at-Risk (VaR); CAViaR approach; risk spillover; Granger causality;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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