The determinants of volatility on the American crude oil futures market

Delphine Lautier and Fabrice Riva
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Delphine Lautier: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Fabrice Riva: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article focuses on the volatility of crude oil futures prices on the New York Mercantile Exchange. It aims at examining whether this market creates excess volatility, which would not be observed in the absence of such a market. In order to reach this objective, price fluctuations are separated into two components: an information component that reflects a rational assessment of the information arrival, and an error component that represents the noise introduced by the trading process. We show that a significant part of the volatility recorded during exchange trading hours is caused by mispricing errors. In particular, this phenomenon affects the nearest futures contract.

Keywords: exchanges; data analysis; microeconomy; markets; macroeconomy (search for similar items in EconPapers)
Date: 2008
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Published in OPEC Energy Review, 2008, 32 (2), pp.105-122. ⟨10.1111/j.1753-0237.2008.00145.x⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02278255

DOI: 10.1111/j.1753-0237.2008.00145.x

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