Price Formation and Intertemporal Arbitrage within a Low-Liquidity Framework: Empirical Evidence from European Natural Gas Markets

Sebastian Nick

No 2013-14, EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

Abstract: In this study, the informational efficiency of the European natural gas market is analyzed by empirically investigating price formation and arbitrage efficiency between spot and futures markets. Econometric approaches are specified that explicitly account for nonlinearities and the low liquidity-framework of the considered gas hubs. The empirical results reveal that price discovery takes place on the futures market, while the spot price subsequently follows the futures market price. Furthermore, there is empirical evidence of significant market frictions hampering intertemporal arbitrage. UK’s NBP seems to be the hub at which arbitrage opportunities are exhausted most efficiently, although there is convergence in the degree of intertemporal arbitrage efficiency over time at the hubs investigated.

Keywords: natural gas market; informational efficiency; liquidity; nonlinear causality; threshold error correction; Kalman filter (search for similar items in EconPapers)
JEL-codes: C58 G14 Q40 Q41 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-08-12
New Economics Papers: this item is included in nep-cis and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ewi.uni-koeln.de/fileadmin/user_upload/ ... mporal_Arbitrage.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ewi.uni-koeln.de/fileadmin/user_upload/Publikationen/Working_Paper/EWI_WP_13-14_Price_Formation_and_Intertemporal_Arbitrage.pdf [301 Moved Permanently]--> https://www.ewi.uni-koeln.de/fileadmin/user_upload/Publikationen/Working_Paper/EWI_WP_13-14_Price_Formation_and_Intertemporal_Arbitrage.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:ris:ewikln:2013_014

Access Statistics for this paper

More papers in EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI) Contact information at EDIRC.
Bibliographic data for series maintained by Sabine Williams ().