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On the relationship between forward energy prices: a panel data cointegration approach

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  • Marc Joëts

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

On the relationship between forward energy prices: a panel data cointegration approach Abstract: The aim of this paper is to investigate the long-term relationship between the forward prices of crude oil and domestic fuel (FOD) on the period from August 2003 to April 2010. To this end, we rely on a panel data setting by considering a sample of 36 maturities for the forward prices. Using panel cointegration tests, our results show that oil and fuel prices are characterized by a strong homogeneous long-term equilibrium relationship for several maturities. Estimating a panel error correction model, we find that FOD prices are influenced by oil prices variations on both the short and the long run. The existence of a unique equilibrium model for all maturities may have important implications for financial arbitrage strategies based on energy prices relationships.

Suggested Citation

  • Marc Joëts, 2010. "On the relationship between forward energy prices: a panel data cointegration approach," Working Papers hal-04140907, HAL.
    • Handle: RePEc:hal:wpaper:hal-04140907
    Note: View the original document on HAL open archive server: https://hal.science/hal-04140907
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    References listed on IDEAS

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    1. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
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    4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    5. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
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