Price Discontinuities in Energy Spot and Futures Prices

Svetlana Maslyuka, Kristian Rotarub and Alexander Dokumentovc

No 33-13, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: How often do jumps or price discontinuities occur on energy markets? What is the dynamics of the energy market sentiment (based on media coverage of economic fundamentals and other news events) that influence market behavior? How does the market sentiment affect the commodity returns? This study answers these questions by first, investigating jumping behavior of daily energy spot and nearest month futures returns for crude oil, natural gas, gasoline, heating oil and propane and second, by proposing a novel Cumulative Sentiment Index applied to the analysis of the detected jumps in returns. Our findings confirm previous studies that jumps are the common feature for all energy commodities studied. For some commodities such as gasoline spot and futures and heating oil futures, the average number of jumps per year has increased after the start of the Global Financial Crisis.

Keywords: jumps; energy prices; sentiment; nonparametric tests (search for similar items in EconPapers)
JEL-codes: C14 G12 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2013-07
New Economics Papers: this item is included in nep-ene
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