Information spillover dynamics of the energy futures market sector: A novel common factor approach

Duminda Kuruppuarachchi and I.M. Premachandra

Energy Economics, 2016, vol. 57, issue C, 277-294

Abstract: We investigate sector level information spillovers from energy to other futures market sectors using a novel conditionally heteroscedastic common factor (CHCF). CHCF represents common trends of macroeconomic influences on futures markets. We find that energy sector has the highest degree of commonality compared to other sectors. Conditional correlations between energy and non-energy sectors are highly persistent. The volatility spillover from the energy sector is prominent compared with mean and extreme market risk spillovers. Extreme risk spillovers from the energy to other sectors have an asymmetric effect. Shocks to energy futures have a significant potential impact on other markets during crises.

Keywords: Information spillover; Energy futures; Granger causality; Heteroscedastic principle component factors; Impulse response functions (search for similar items in EconPapers)
JEL-codes: C10 E32 E44 G01 G15 Q40 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:57:y:2016:i:c:p:277-294

DOI: 10.1016/j.eneco.2016.05.015

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