EconPapers    
Economics at your fingertips  
 

Shocks propagation across the futures term structure: evidence from crude oil prices

Delphine Lautier, Franck Raynaud and Michel Robe ()
Additional contact information
Delphine Lautier: DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique
Franck Raynaud: UNIL - Université de Lausanne

Post-Print from HAL

Abstract: To what extent are futures prices interconnected across the maturity curve? Where in the term structure do price shocks originate, and which maturities do they reach? We propose an approach based on information theory to study these cross-maturity linkages and the extent to which connectedness is impacted by market events. We introduce the concepts of backward and forward information flows, and a novel type of directed graph, to investigate the propagation of price shocks across the WTI term structure. Using daily data, we show that the mutual information shared by contracts with different maturities increases substantially starting in 2004, falls back sharply in 2011-2014, and recovers thereafter. Our findings point to a puzzling re-segmentation by maturity of the WTI market in 2012-2014. We document that, on average, short-dated futures emit more information than do backdated contracts. Importantly, however, we also show that significant amounts of information flow backwards along the maturity curve -- almost always from intermediate maturities, but at times even from far-dated contracts. These backward flows are especially strong and far-reaching amid the 2007-2008 oil price boom/bust.

Keywords: Mutual information; Market integration; Shocks propagation; Information flows; Directed graphs; Term structure; Futures; Crude oil; WTI (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-mac
Date: 2017-11
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01781765
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Published in The Commercial Ags Seminar Series, Illinois University at Urbana-Champaign,, Nov 2017, Urbana-Champaign (Ill.), United States. 2017

Downloads: (external link)
https://hal.archives-ouvertes.fr/hal-01781765/document (application/pdf)

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:hal:journl:hal-01781765

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2019-03-31
Handle: RePEc:hal:journl:hal-01781765