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Article: Petroleum spreads and the term structure of futures prices

TitlePetroleum spreads and the term structure of futures prices
Authors
Issue Date2006
PublisherRoutledge. The Journal's web site is located at http://www.tandf.co.uk/journals/routledge/00036846.html
Citation
Applied Economics, 2006, v. 38 n. 16, p. 1917-1929 How to Cite?
AbstractWe employ the term structure of gasoline and heating oil prices, proxied by convenience yields, to explain the variation in the spread between the prices of gasoline and crude oil and the prices of heating oil and crude oil. We demonstrate that the marginal convenience yields in the gasoline and heating oil markets explained much of the variation in the spreads between 1986 and 1999. The evidence indicates the importance of a disaggregated treatment of the term structure of prices: the convenience yield is found to explain a substantially higher amount of the variation in the spread when it is decomposed by maturity, even after controls for seasonality and inventory levels are implemented. These findings support the notion that the futures term structure contains information beyond what can be garnered via obvious or easily available proxies of current supply and demand. The findings are also supported in an alternate specification that tests for the origins of information spillover (leadership) between the commodities: it is demonstrated that decomposed convenience yields explain a substantial portion of the volatility spillover from the gasoline and heating oil markets to the crude market.
Persistent Identifierhttp://hdl.handle.net/10722/85568
ISSN
2015 Impact Factor: 0.586
2015 SCImago Journal Rankings: 0.441
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorAdrangi, Ben_HK
dc.contributor.authorChatrath, Aen_HK
dc.contributor.authorSong, Fen_HK
dc.contributor.authorSzidarovszky, Fen_HK
dc.date.accessioned2010-09-06T09:06:40Z-
dc.date.available2010-09-06T09:06:40Z-
dc.date.issued2006en_HK
dc.identifier.citationApplied Economics, 2006, v. 38 n. 16, p. 1917-1929en_HK
dc.identifier.issn0003-6846en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85568-
dc.description.abstractWe employ the term structure of gasoline and heating oil prices, proxied by convenience yields, to explain the variation in the spread between the prices of gasoline and crude oil and the prices of heating oil and crude oil. We demonstrate that the marginal convenience yields in the gasoline and heating oil markets explained much of the variation in the spreads between 1986 and 1999. The evidence indicates the importance of a disaggregated treatment of the term structure of prices: the convenience yield is found to explain a substantially higher amount of the variation in the spread when it is decomposed by maturity, even after controls for seasonality and inventory levels are implemented. These findings support the notion that the futures term structure contains information beyond what can be garnered via obvious or easily available proxies of current supply and demand. The findings are also supported in an alternate specification that tests for the origins of information spillover (leadership) between the commodities: it is demonstrated that decomposed convenience yields explain a substantial portion of the volatility spillover from the gasoline and heating oil markets to the crude market.en_HK
dc.languageengen_HK
dc.publisherRoutledge. The Journal's web site is located at http://www.tandf.co.uk/journals/routledge/00036846.htmlen_HK
dc.relation.ispartofApplied Economicsen_HK
dc.titlePetroleum spreads and the term structure of futures pricesen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0003-6846&volume=&spage=&epage=&date=2006&atitle=Petroleum+spreads+and+the+term+structure+of+futures+pricesen_HK
dc.identifier.emailSong, F: fmsong@hkucc.hku.hken_HK
dc.identifier.authoritySong, F=rp01095en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1080/00036840500427189en_HK
dc.identifier.scopuseid_2-s2.0-33749004803en_HK
dc.identifier.hkuros130428en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-33749004803&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume38en_HK
dc.identifier.issue16en_HK
dc.identifier.spage1917en_HK
dc.identifier.epage1929en_HK
dc.identifier.isiWOS:000240951900006-
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridAdrangi, B=6603619576en_HK
dc.identifier.scopusauthoridChatrath, A=6701310668en_HK
dc.identifier.scopusauthoridSong, F=7203075605en_HK
dc.identifier.scopusauthoridSzidarovszky, F=7005410197en_HK

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