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Information and volatility linkages across energy and financial markets

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  • Ashley Ding

Abstract

This study examines information and volatility linkages across energy and financial markets. In a world economy so connected, the impacts of climate change are likely to be transmitted through interlinked global markets. Hence, uncovering and understanding the interaction across these markets is a fundamental concern during the energy transition as it helps to understand how to strengthen incentives to facilitate energy investments. Based on the relation between information flows and volatility, this study employs a simple correlation approach based on implied volatility measures and the trading model of Fleming et al. to measure the common information linkages, as gauged by the correlation of return volatilities. The results suggest that volatility linkages across these markets are strong due to common information sharing and cross-market hedging. JEL Classification: G12, G14

Suggested Citation

  • Ashley Ding, 2019. "Information and volatility linkages across energy and financial markets," Australian Journal of Management, Australian School of Business, vol. 44(4), pages 594-613, November.
    • Handle: RePEc:sae:ausman:v:44:y:2019:i:4:p:594-613
    DOI: 10.1177/0312896219862320
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    References listed on IDEAS

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    More about this item

    Keywords

    Energy markets; information linkages; state pricing; volatility;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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