Assessing the Degree of Spot Market Integration for U.S. Natural Gas: Evidence from Daily Price Data

Cuddington, John T.; Wang, Zhongmin

doi:10.1007/s11149-006-6035-2

Cited by 55 publications

(51 citation statements)

References 21 publications

(10 reference statements)

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“…Our results are consistent with the study by Cuddington and Wang (2006) who employ daily US natural gas spot prices collected at 76 market locations from 1993-1997 and find that 74% of the bilateral price gaps to be stationary. For the stationary natural gas price gaps, the half-lives estimated in this study were in the range of 2 days to 2 weeks.…”

Section: Data and Empirical Analysissupporting

confidence: 92%

“…Indeed, casual inspection reveals that the price of gasoline can vary considerably across the US states. The law of one price may not hold across geographically dispersed markets on account of non-zero transportation/transaction constraints on the volume of a good and/or restricted access to the markets (Stigler and Sherwin, 1985;Cuddington and Wang, 2006). Such considerations might inhibit the ability of arbitrage to ensure that prices will be different only to the extent of these costs.…”

Section: Introductionmentioning

confidence: 99%

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On the dynamics of gasoline market integration in the United States: Evidence from a pair-wise approach

2013

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper employs a pair-wise approach to examine regional integration in the US gasoline market. Using gasoline price data at the state level over a period of more than two decades, we find strong support for the view that the law of one price holds in regional markets, as more than 80% of bivariate price differentials turn out to be stationary. Furthermore, we uncover evidence that the speed at which prices converge to the long-run equilibrium depends upon the distance between states. Asymmetries are also present in this relationship. Our findings suggest that the more similar are states with respect to taxation, gas stations and refining capacity, the faster is the speed of adjustment towards the long-run equilibrium. Terms of use: Documents inJEL Classification: C33, Q47, R11.Keywords: Panel data, pair-wise approach, market integration, gasoline, speed of adjustment.♦ We are very grateful to two anonymous referees for their constructive comments and suggestions that helped to improve our paper. The usual disclaimer applies.

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Section: Data and Empirical Analysissupporting

confidence: 92%

Section: Introductionmentioning

confidence: 99%

On the dynamics of gasoline market integration in the United States: Evidence from a pair-wise approach

2013

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“…Works of King and Cuc (1996) as well as Cuddington and Wang (2004) use time-varying coefficient estimation and autoregressive models of price differentials, respectively, to detect convergence of spot prices in the US. For Europe, the only analysis of that type was carried out by Tveteras (2001, 2002) suggesting an increasing level of integration of European natural gas prices at the country level.…”

Section: Introductionmentioning

confidence: 99%

Convergence of European spot market prices for natural gas? A real-time analysis of market integration using the Kalman Filter

Neumann¹,

Siliverstovs

2006

Applied Economics Letters

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper provides a textbook example of integration between commodity markets, and the subsequent price convergence or absence thereof. We analyze price relations between spot markets for natural gas in Europe. We apply time-varying coefficient estimation applying the Kalman filter, to test whether price convergence between different locations is really taking place. Our results reveal that the construction of a pipeline between the UK and Zeebrugge (Belgium) has led to almost perfect price convergence between these locations; on the other hand, liberalization on the continent does not seem to be working yet. Terms of use: Documents inJEL-Classification: C32, L95, D43, Q49

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“…13 Thus our hypotheses are: The persistence of the spreads (following external shocks) is examined by the methodology of Cuddington and Wang (2006). The methodology is based on impulse response functions (IRF) and the use of autoregressive (AR) models robust to non-standard error distributions.…”

Section: Integration Of European Volatility Indicesmentioning

confidence: 99%

European ‘Fear’ Indices – Evidence before and during the Financial Crisis

Aussenegg

Götz²,

Jelic

2013

SSRN Journal

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We document a negative and asymmetric contemporaneous relation of European stock and implied volatility returns. The negative relation is significantly more pronounced at the highest quantile of the stock market return distribution (i.e. largest price decrease). The relation between stock returns and implied volatility exhibits differences consistent with European institutional and cultural clusters. For example, German stock market tends to be more responsive to changes in implied volatility compared to UK stock market. In addition, the volatility spread for these two markets persist for a longer period compared to other European volatility spreads. The degree of integration between the leading European (UK, Germany and France) volatility markets, however, is very high and shocks on the implied volatility spread die out within a few days. Our Markov switching model distinguishes three volatility regimes.Large changes in both, implied volatility and stock returns increase the probability that volatility enters a higher (from low to middle and from middle to high) volatility regime. Factor loadings obtained by principal component analysis (PCA) of volatility returns are also regime dependent. Compared to US, the changes in European implied volatility tend to be more driven by tilts and non-linear movements of the volatility term structure. Our findings lend support to the behavioral explanation of the stock return-implied volatility relation and have implications for risk management.JEL classification: C32, G13, G15

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Assessing the Degree of Spot Market Integration for U.S. Natural Gas: Evidence from Daily Price Data

Cited by 55 publications

References 21 publications

On the dynamics of gasoline market integration in the United States: Evidence from a pair-wise approach

On the dynamics of gasoline market integration in the United States: Evidence from a pair-wise approach

Convergence of European spot market prices for natural gas? A real-time analysis of market integration using the Kalman Filter

European ‘Fear’ Indices – Evidence before and during the Financial Crisis

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