Energy price transmissions during extreme movements |
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| Institution: | 1. University of Zurich, 203, Rämistr. 66, CH-8006 Zürich, Switzerland;2. Brunel University London, Uxbridge UB8 3PH, United Kingdom;3. European Central Bank, Kasiserstr. 29, D-60311 Frankfurt, Germany;1. THEMA, Université de Cergy-Pontoise and CREST, France;2. European Central Bank, Germany;3. Banque de France, International Macroeconomics Division, France;1. Department of Mathematics, University of Dhaka, Bangladesh;2. School of Economics, Finance and Marketing, RMIT University, Melbourne, Australia;3. School of Economics and Finance, Massey University, Palmerston North, New Zealand;4. School of Business, University of Southampton, UK |
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| Abstract: | This paper investigates price transmissions across European energy forward markets at distinct maturities during both normal times and extreme fluctuation periods. To this end, we rely on the traditional Granger causality test (in mean) and its multivariate extension in tail distribution developed by Candelon, Joëts, and Tokpavi (2013). Considering forward energy prices at 1, 10, 20, and 30 months, it turns out that no significant causality exists between markets at regular times whereas comovements are at play during extreme periods especially in bear markets. More precisely, energy prices comovements appear to be stronger at short horizons than at long horizons, testifying an eventual Samuelson mechanism in the maturity prices curve. Diversification strategies tend to be more efficient as maturity increases. |
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