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Examining Asymmetric Behavior in US Petroleum Futures and Spot Prices

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  • Bradley T. Ewing
  • Shawkat M. Hammoudeh
  • Mark A. Thompson

Abstract

This paper uses the momentum-threshold autoregressive (M-TAR) model to examine the possible asymmetric relationship between petroleum futures and spot prices for three different markets: crude oil, heating oil, and gasoline in the United States. The results indicate that the futures and spot prices for each petroleum type are cointegrated when allowing for asymmetric adjustment for each of these energy markets. We further investigate the asymmetric behavior between the futures and spot prices by estimating the M-TAR error-correction model. The M-TAR model allows us to document the adjustments that these markets undergo in response to changes in the basis.

Suggested Citation

  • Bradley T. Ewing & Shawkat M. Hammoudeh & Mark A. Thompson, 2006. "Examining Asymmetric Behavior in US Petroleum Futures and Spot Prices," The Energy Journal, , vol. 27(3), pages 9-24, July.
    • Handle: RePEc:sae:enejou:v:27:y:2006:i:3:p:9-24
    DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No3-2
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    References listed on IDEAS

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    1. Root, Thomas H. & Lien, Donald, 2003. "Can modeling the natural gas futures market as a threshold cointegrated system improve hedging and forecasting performance?," International Review of Financial Analysis, Elsevier, vol. 12(2), pages 117-133.
    2. Param Silvapulle & Imad A. Moosa, 1999. "The relationship between spot and futures prices: Evidence from the crude oil market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 19(2), pages 175-193, April.
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