Dynamic spillover effects across petroleum spot and futures volatilities, trading volume and open interest

Abstract

This paper examines the existence of dynamic spillover effects across petroleum based commodities and among spot-futures volatilities, trading volume and open interest. Realized volatilities of spot-futures markets are used as inputs to estimate a VAR model following Diebold and Yilmaz (2014, 2015) and distinguish dynamic spillovers in total and net effects. Results reveal the existence of large and time-varying spillovers among the spot-futures volatilities and across petroleum-based commodities when examined pairwise. In addition, speculative pressures, as reflected by futures trading volume, and hedging pressures, as reflected by open interest, are shown to transmit large and persistent spillovers to the spot and futures volatilities of crude oil and heating oilgasoline markets, respectively.

Analysis of Volatility Volume and Open Interest for Nifty Index Futures Using GARCH Analysis and VAR Model

“…They opine that short-term future price predictability can lead to effective hedge ratios. Magkonis and Tsouknidis (2017) suggested speculative pressures, as reflected by futures trading volume, and hedging pressures, as reflected by open interest, on account of large and persistent spillovers to the spot and futures volatilities of crude oil and heating oil-gasoline markets, respectively. Floros and Salvador (2016) opined that liquidity variables, namely volume and open interest, account for up to 20% of the variation for some markets, and are important variables causing volatility overall during periods of market stability.…”

What drives food price volatility? Evidence based on a generalized VAR approach applied to the food, financial and energy markets

“…The first one, more frequently used, is based on different specifications of multivariate GARCH models (see, e.g., Zhang et al, 2009;Serra et al, 2011;Trujillo-Barrera et al, 2012;Gardebroek and Hernandez, 2013;Creti et al, 2013;Mensi et al, 2014;Abdelradi and Serra, 2015a, b;Cabrera and Schulz, 2016;Hegerty, 2016;Thorp, 2013, 2016). The second one applies the measures of volatility spillover proposed by Diebold and Yilmaz (2009) and Diebold and Yilmaz (2012) (see, e.g., Antonakakis et al, 2016;Batten, et al 2015;Chevallier and Ielpo, 2013;Jebabli et al, 2014;Magkonis, and Tsouknidis, 2017;Awartani et al, 2016;Grosche and Heckelei, 2016;and Kang et al, 2017). Three main strands can be identified in the literature on the sources of food prices volatility.…”

The price-volume relationship for new and remanufactured smartphones

“…For instance, Malliaris and Urritia (1998) 2000document the presence of a linear causality running from volumes to prices, but not vice versa. Magkonis and Tsouknidis (2017) examine whether the price-volume link occurs in the markets for petroleum-based commodities, and document the existence of time-varying spillover effects between futures trading volumes and prices. Alizadeh and Tamvakis (2016) investigate the price-volume relationship in the markets for WTI and gas futures contracts…”