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The Informational Efficiency of European Natural Gas Hubs: Price Formation and Intertemporal Arbitrage

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  • Sebastian Nick

Abstract

In this study, the informational efficiency of the European natural gas market is analyzed by empirically investigating price formation and arbitrage efficiency between spot and futures markets. Econometric approaches accounting for nonlinearities induced by the low liquidity-framework and by technical constraints of the considered gas hubs are specified. The empirical results reveal that price discovery generally takes place on the futures market. Thus, the futures market seems to be more informationally efficient than the spot market. The theory of storage seems to hold at all hubs in the long run. There is empirical evidence of significant market frictions hampering intertemporal arbitrage. UK’s NBP and Austria’s CEGH seem to be the hubs at which arbitrage opportunities are exhausted most efficiently, although there is convergence in the degree of intertemporal arbitrage efficiency over time at the hubs investigated.

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  • Sebastian Nick, 2016. "The Informational Efficiency of European Natural Gas Hubs: Price Formation and Intertemporal Arbitrage," The Energy Journal, , vol. 37(2), pages 1-30, April.
    • Handle: RePEc:sae:enejou:v:37:y:2016:i:2:p:1-30
    DOI: 10.5547/01956574.37.2.snic
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    2. Rafael Garaffa, Alexandre Szklo, André F. P. Lucena, and José Gustavo Féres, 2019. "Price Adjustments and Transaction Costs in the European Natural Gas Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    3. Tadahiro Nakajima & Yuki Toyoshima, 2019. "Measurement of Connectedness and Frequency Dynamics in Global Natural Gas Markets," Energies, MDPI, vol. 12(20), pages 1-15, October.
    4. Saleh Mothana Obadi & Matej Korcek, 2023. "Examining the Drivers of Natural Gas Price in Europe - Focus on the Role of Speculators," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 356-366, May.

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    More about this item

    Keywords

    Natural gas market; Informational efficiency; Nonlinear causality; Threshold error correction; Kalman filter;
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    JEL classification:

    • F0 - International Economics - - General

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