Information and volatility linkages across energy and financial markets

Ashley Ding

Australian Journal of Management, 2019, vol. 44, issue 4, 594-613

Abstract: This study examines information and volatility linkages across energy and financial markets. In a world economy so connected, the impacts of climate change are likely to be transmitted through interlinked global markets. Hence, uncovering and understanding the interaction across these markets is a fundamental concern during the energy transition as it helps to understand how to strengthen incentives to facilitate energy investments. Based on the relation between information flows and volatility, this study employs a simple correlation approach based on implied volatility measures and the trading model of Fleming et al. to measure the common information linkages, as gauged by the correlation of return volatilities. The results suggest that volatility linkages across these markets are strong due to common information sharing and cross-market hedging. JEL Classification: G12, G14

Keywords: Energy markets; information linkages; state pricing; volatility (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:44:y:2019:i:4:p:594-613

DOI: 10.1177/0312896219862320

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