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Extant linkages between Shanghai crude oil and US energy futures: Insights from spillovers of higher-order moments

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  • Banerjee, Ameet Kumar
  • Dionisio, Andreia
  • Sensoy, Ahmet
  • Goodell, John W.

Abstract

This study is epicentral to analyzing the impact of futures volatility on portfolio and risk management, as extant literature indicates the challenges of using economic variables that fall short of forecasting volatility beyond lagged values. Further, higher moments may be better adaptive to signaling distress during market upheavals. This paper sources data from Bloomberg from March 26, 2018–April 28, 2023, to examine the dynamic spillovers of higher moments among Shanghai International Energy Exchange and US energy futures contracts by constructing realized skewness and kurtosis. Using nonlinear techniques of mutual information and time-varying vector autoregression (TVP-VAR), we show that realized skewness and kurtosis offer significant information on spillover transmission between the two futures markets, primarily through the crises of COVID-19 and the Russia and Ukraine war. Further, we identify that the risks embedded in these future contracts have increased significantly. Our results have important implications for policymakers, investors, and risk managers.

Suggested Citation

  • Banerjee, Ameet Kumar & Dionisio, Andreia & Sensoy, Ahmet & Goodell, John W., 2024. "Extant linkages between Shanghai crude oil and US energy futures: Insights from spillovers of higher-order moments," Energy Economics, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:eneeco:v:136:y:2024:i:c:s0140988324003918
    DOI: 10.1016/j.eneco.2024.107683
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    More about this item

    Keywords

    Energy futures; Shanghai international energy exchange; Risk management; Mutual information; TVP-VAR;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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