Causality Between Market Liquidity and Depth for Energy and Grains

Ramazan Sarı, Shawkat Hammoudeh, Chia-Lin Chang () and Michael McAleer

No 2011-10, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: This paper examines the roles of futures prices of crude oil, gasoline, ethanol, corn, soybeans and sugar in the energy-grain nexus. It also investigates the own- and cross-market impacts for lagged grain trading volume and open interest in the energy and grain markets. According to the results, the conventional view, for which the impacts are from oil to gasoline to ethanol to grains in the energy-grain nexus, does not hold well in the long run because the oil price is influenced by gasoline, soybeans and oil. Moreover, gasoline is preceded by only the oil price and ethanol is not foreshadowed by any of the prices. However, in the short run, two-way feedback in both directions exists in all markets. The grain trading volume effect across oil and gasoline is more pronounced in the short run than the long run, satisfying both the overconfidence/disposition and new information hypotheses across markets. The results for the ethanol open interest shows that money flows out of this market in both the short and long run, but no results suggest across market inflows or outflows to the other grain markets.

Keywords: Causality; market liquidity; depth; energy; grains. (search for similar items in EconPapers)
JEL-codes: Q11 Q18 Q42 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2011
New Economics Papers: this item is included in nep-agr
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https://eprints.ucm.es/id/eprint/12614/1/1110.pdf (application/pdf)

Related works:
Journal Article: Causality between market liquidity and depth for energy and grains (2012)
Working Paper: Causality Between Market Liquidity and Depth for Energy and Grains (2011)
Working Paper: Causality Between Market Liquidity and Depth for Energy and Grains (2011)
Working Paper: Causality Between Market Liquidity and Depth for Energy and Grains (2011)
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