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Title: The nexus between natural gas spot and futures prices at NYMEX: Do weather shocks and non-linear causality in low frequencies matter?
Authors: Dergiades, Theologos
Madlener, Reinhard
Christofidou, Georgia
Type: Article
Subjects: FRASCATI::Social sciences::Economics and Business::Economics
FRASCATI::Social sciences::Economics and Business::Econometrics
Keywords: Natural gas
Spot and futures markets
Frequency domain causality
Issue Date: Nov-2018
Publisher: Elsevier
Source: The Journal of Economic Asymmetries
Volume: 18
First Page: e00100
Abstract: The existence of non-linear dynamics in the prices of commodities is an endemic feature and one of the most fundamental stylized facts in the finance literature. This study, conditioning on weather shocks, investigates the nature of the existing predictive power between natural gas spot and futures prices at the NYMEX market. By implementing a causality test in the frequency domain, we find that the short maturity futures market offers a significant predictive power towards the spot market. The identified predictive power over the frequency band proves to be asymmetric with respect to the first- and the second-conditional moments of the series. In particular, our results show that for high frequencies (short-run) predictability is linked to the first-conditional moment while, for low frequencies (long-run) predictability is attributed to the second-conditional moment.
ISSN: 1703-4949
Other Identifiers: 10.1016/j.jeca.2018.e00100
Appears in Collections:Department of International and European Studies

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