HIGH PRICE VOLATILITY AND SPILLOVER EFFECTS IN ENERGY MARKETS

Aaron Singh, Berna Karali and Octavio Ramirez

No 103593, 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania from Agricultural and Applied Economics Association

Abstract: We analyze the time-varying volatility in crude oil, heating oil, and natural gas futures markets by incorporating changes in important macroeconomic variables and major political and weather-related events into the conditional variance equations. We allow asymmetric responses to random disturbances in each market as well as to good and bad economic news in the overall economy. We also investigate whether there are spillover effects among these energy markets. A bi-directional volatility spillover effect is found between heating oil and natural gas markets. Among the macro variables considered the spread between the 10-year and 2-year Treasury constant maturity rate is found to have a positive relationship between the volatilities of all commodities. The events that had a major impact on the volatilities of energy commodities include the September 11th terrorist attacks, hurricane Katrina, and the 2008 U.S. financial crisis. The theory of storage is not supported in any of the three commodities. Seasonality and day-of-the week effects are found for all three commodities. Key

Keywords: Marketing; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 31
Date: 2011
New Economics Papers: this item is included in nep-ene and nep-sea
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Citations: View citations in EconPapers (2)

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Journal Article: Macro determinants of volatility and volatility spillover in energy markets (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea11:103593

DOI: 10.22004/ag.econ.103593

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