A re-examination of maturity effect of energy futures price from the perspective of stochastic volatility

Wei-han Liu

Energy Economics, 2016, vol. 56, issue C, 351-362

Abstract: This paper selects stochastic volatility (SV) as the uncertainty or volatility measure to re-examine the Samuelson hypothesis of maturity effect (SHME) (Samuelson, 1965). Stochastic dominance is used to examine whether the stochastic volatility level dominates with respect to maturity. The empirical analyses of energy-futures price series generally provide mild support for this hypothesis in terms of the first two degrees of stochastic dominance. Each type of futures has its own properties with respect to the maturity effect. SV levels play a role in determining the testing outcome. The hypothesis is more likely to hold at low SV levels. The higher the volatility level, the less likely the SHME will hold because SV surges to its peak level regardless of maturity.

Keywords: Samuelson hypothesis of maturity effect; Stochastic volatility; Stochastic dominance (search for similar items in EconPapers)
JEL-codes: C58 G13 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988316300767
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:56:y:2016:i:c:p:351-362

DOI: 10.1016/j.eneco.2016.03.026

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().