The Nexus between Natural Gas Spot and Futures Prices at NYMEX: Do Weather Shocks and Non-Linear Causality in Low Frequencies Matter?

FCN Working Paper No. 17/2012 (revised September 2013)

31 Pages Posted: 21 Mar 2013 Last revised: 4 Sep 2013

See all articles by Theologos Dergiades

Theologos Dergiades

University of Macedonia

Reinhard Madlener

RWTH Aachen University

Georgia Christofidou

International Hellenic University (IHU)

Date Written: December 1, 2012

Abstract

The existence of non-linear dynamics in the prices of financial commodities is an endemic feature and one of the most fundamental stylized facts in the literature. This study, conditioning on weather shocks, investigates the nature of the existing predictive power between natural gas spot and futures prices with one-month maturity at the NYMEX market. By implementing successively, before and after a first-moment filtering, a frequency domain causality test [Breitung J., Candelon B., 2006. Testing for short- and long-run causality: a frequency domain approach. Journal of Econometrics 132, 363-378], we corroborated a unidirectional non-linear forecasting ability in low frequencies that runs from the short maturity futures market towards the spot market.

Keywords: Natural gas, Spot and futures markets, Frequency domain causality

JEL Classification: C14, C58, G14, G15

Suggested Citation

Dergiades, Theologos and Madlener, Reinhard and Christofidou, Georgia, The Nexus between Natural Gas Spot and Futures Prices at NYMEX: Do Weather Shocks and Non-Linear Causality in Low Frequencies Matter? (December 1, 2012). FCN Working Paper No. 17/2012 (revised September 2013) . Available at SSRN: https://ssrn.com/abstract=2236278 or http://dx.doi.org/10.2139/ssrn.2236278

Theologos Dergiades (Contact Author)

University of Macedonia ( email )

156 Egnatia St.
PO 1591
Thessaloniki
Greece
54636 (Fax)

Reinhard Madlener

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustra├če 10
Aachen, 52074
Germany
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)

HOME PAGE: http://www.eonerc.rwth-aachen.de/fcn

Georgia Christofidou

International Hellenic University (IHU) ( email )

14th km Thessaloniki
Moudania
Thermi, 57001
Greece

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