Market conditions, trader types and price–volume relation in energy futures markets

Amir H. Alizadeh and Michael Tamvakis

Energy Economics, 2016, vol. 56, issue C, 134-149

Abstract: We investigate the asymmetric relations between trading volume and price changes, and trading volume and price volatility of energy futures contracts across maturities and under different market conditions. Using a relatively long sample of daily observations, we examine whether the impact of trading volume on returns and volatility of futures contracts can be time-varying and dependent on the market condition. We differentiate the market condition based on the slope of the forward curve into backwardation and contango. The results indicate that trading volume and returns are positively related when the market is in backwardation and negatively related when the market is in contango. In addition, the positive relation between changes in trading volume and volatility of futures contracts seem to be stronger when the market is in backwardation than when it is in contango. Finally, the results indicate that, to a certain extent, trade participation and trading activities of agents in energy futures markets can be explained by the slope of the forward curve which reflects the market condition and sentiment.

Keywords: Market condition; Volume; Volatility; Energy Futures; Trade participation (search for similar items in EconPapers)
JEL-codes: C30 G01 G12 G20 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:56:y:2016:i:c:p:134-149

DOI: 10.1016/j.eneco.2016.03.001

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