Spillovers and directional predictability between international energy commodities and their implications for optimal portfolio and hedging |
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| Institution: | 1. Department of Finance and Investment, College of Economics and Administrative Sciences, Al-Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 5701, Saudi Arabia;2. LARTIGE, ASTURIMA, University of Sousse, Tunisia;3. Indian Institute of Management (IIM) Bodh Gaya, Bodh Gaya, India;4. Lebow College of Business, Drexel University, Philadelphia, USA;5. Institute of Business Research, University of Economics Ho Chi Minh, Vietnam;1. School of Management Engineering, Nanjing University of Information Science & Technology, Nanjing 210044, China;2. China Institute of Manufacturing Development, Nanjing University of Information Science & Technology, Nanjing 210044, China;3. School of Statistics and Mathematics, Zhejiang Gongshang University, Hangzhou, Zhejiang 310018, China;4. Collaborative Innovation Center for Statistical Data Engineering Technology and Application, Zhejiang Gongshang University, Hangzhou 310018, China;1. School of Statistics and Applied Mathematics, Anhui University of Finance and Economics, Bengbu, 233030, People''s Republic of China;2. International Management Institute, Bhubaneswar, ODISHA, India;3. Indian Institute of Management Bodh Gaya, Bodh Gaya, India;4. Department of Economics, Suleyman Demirel University, Isparta, Turkey;5. Department of Political Science, Roma Tre University, Italy;1. Department of Industrial and System Engineering, Hosei University, Japan;2. School of Business, Aoyama Gakuin University, Japan |
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| Abstract: | This study sheds a new light on the dependence and the directional predictability between eight major energy price returns, using the Cross-Quantilogram (CQ) and the Partial CQ (PCQ) analysis. The energy prices cover the time series for the U.S. natural gas and seven internationally traded crude oil types. The results reveal a significant directional predictability running from most of energy commodities returns to the OPEC basket and the very light Tapis crude oil returns. However, the quantile predictability in both directions is enabled only for the relations between the light Brent and the light WTI, and between the OPEC basket and the Malaysian Tapis. The time-varying predictability analysis reveals that there is a significant upper quantile dependence between these international energy commodities. Finally, we find that the TAPIS can be a good hedging vehicle for other energy markets. These findings may be instructive for both policymakers (in terms of financial stability) and market participants (in terms of performance). |
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| Keywords: | Dependence Directional predictability Cross-quantilogram Energy market Portfolio performance |
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