Realized volatility and correlation in energy futures markets |
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| Authors: | Tao Wang Jingtao Wu Jian Yang |
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| Institution: | 1. Assistant Professor of Economics, Department of Economics, Queens College;2. Graduate Center of the City University of New York, New York;3. Department of Economics, Iowa State University, Iowa;4. Associate Professor of Finance, Business School, University of Colorado Denver, Colorado |
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| Abstract: | Using high‐frequency returns, realized volatility and correlation of the NYMEX light, sweet crude oil, and Henry‐Hub natural gas futures contracts are examined. The unconditional distributions of daily returns and daily realized variances are non‐Gaussian, whereas the distributions of the standardized returns (normalized by the realized standard deviation) and the (logarithms of) realized standard deviations appear approximately Gaussian. The (logarithms of) standard deviations exhibit long‐memory, but the realized correlation between the two futures does not, implying rather weak inter‐market linkage in the long run. There is evidence of asymmetric volatility for natural gas but not for crude oil futures. Finally, realized crude oil futures volatility responds with an increase in the weeks immediately before the OPEC events recommending price increases. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:993–1011, 2008 |
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