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Effect of Crude Oil Futures Trading on Spot Market Volatility: A Panel Data–Based Counterfactual Prediction Analysis

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  • Xin Yao
  • Qiang Liu

Abstract

Based on panel data, a recently developed method of counterfactual prediction analysis is used in this article to analyze how the launch of Tokyo and Dubai crude oil futures influences the price volatility in the spot market whose underlying instruments are corresponding futures. Analysis results show that the launch of crude oil futures can speed up information integration into market system and reduce the volatility of the crude oil spot market, although the crude oil futures market is characterized mainly by speculative factors. The offshore underlying instrument does not have substantial influences on future contracts, while the scale of the futures market has a significant effect on the spot market volatility.

Suggested Citation

  • Xin Yao & Qiang Liu, 2017. "Effect of Crude Oil Futures Trading on Spot Market Volatility: A Panel Data–Based Counterfactual Prediction Analysis," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(4), pages 918-931, April.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:4:p:918-931
    DOI: 10.1080/1540496X.2016.1210506
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    Cited by:

    1. Scott, Ayesha & Schoen, Tilman & Fernandez-Perez, Adrian, 2020. "The Predictive Power of NZX Dairy Futures," 2020 Conference (64th), February 12-14, 2020, Perth, Western Australia 305230, Australian Agricultural and Resource Economics Society.
    2. Marina V. Vasiljeva & Vadim V. Ponkratov & Elena Y. Kharlamova & Nikolay V. Kuznetsov & Maksim S. Maramygin & Maria V. Volkova, 2019. "Problems and Prospects of Development of the Oil Exchange Market in the Russian Federation," International Journal of Energy Economics and Policy, Econjournals, vol. 9(3), pages 77-86.

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