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The Nexus between Natural Gas Spot and Futures Prices at NYMEX: Do Weather Shocks and Non-Linear Causality in Low Frequencies Matter?

Author Info

  • Dergiades, Theologos

    ()

    (International Hellenic University (IHU))

  • Madlener, Reinhard

    ()

    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

  • Christofidou, Georgia

    ()

    (International Hellenic University (IHU))

Abstract

The existence of non-linear dynamics in the prices of financial commodities is an endemic feature and one of the most fundamental stylized facts in the literature. This study, conditioning on weather shocks, investigates the nature of the existing predictive power between natural gas spot and futures prices with one-month maturity at the NYMEX market. By implementing successively, before and after a first-moment filtering, a frequency domain causality test [Breitung J., Candelon B., 2006. Testing for short- and long-run causality: a frequency domain approach. Journal of Econometrics 132, 363-378], we corroborated a unidirectional non-linear forecasting ability in low frequencies that runs from the short maturity futures market towards the spot market.

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Paper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 17/2012.

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Length: 31 pages
Date of creation: Dec 2012
Date of revision: Sep 2013
Handle: RePEc:ris:fcnwpa:2012_017
Contact details of provider: Web page: http://www.eonerc.rwth-aachen.de/fcn
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Keywords: Natural gas; Spot and futures markets; Frequency domain causality;

Find related papers by JEL classification:

  • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
  • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
  • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
  • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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Cited by:

  1. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "The Impact of Green Framing on Consumers’ Valuations of Energy-Saving Measures," FCN Working Papers 7/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  2. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "An Evaluation of Attribute Anchoring Bias in a Choice Experimental Setting," FCN Working Papers 6/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  3. Sebastian Nick, 2016. "The Informational Efficiency of European Natural Gas Hubs: Price Formation and Intertemporal Arbitrage," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
  4. Mohammed I Shuaibu & Mutiu A Oyinlola, 2013. "Do structural breaks matter in the growth-environment nexus in Nigeria?," Economics Bulletin, AccessEcon, vol. 33(4), pages 2982-2994.

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