Cross-Commodity News Transmission and Volatility Spillovers in the German Energy Markets

47 Pages Posted: 6 Apr 2016 Last revised: 23 Oct 2017

See all articles by Rikard Green

Rikard Green

Energy Quant Solutions Sweden

Karl Larsson

Örebro University

Veronika Lunina

Knut Wicksell Centre for Financial Studies, Lund University

Birger Nilsson

Lund University - Department of Economics

Date Written: January 31, 2016

Abstract

This study investigates volatility spillovers to electric power from large exogenous shocks in the prices of gas, coal, and carbon emission allowances in the German energy market. Our sample ranges from 2008 to 2016 and covers periods of different market conditions. We use a general VAR-BEKK model and the volatility impulse response function methodology to analyze and evaluate the spillover effects. Special attention is paid to selecting an appropriate econometric volatility model. Our results show that the spillover effects often are of a significant magnitude and display considerable variation over time and across commodities. Coal and gas generate non-negligible spillovers during almost the entire sample period. Carbon has very little impact during the early and late parts of the sample, but generates significant, and highly variable, spillovers during the period from 2011 to the end of 2014.

Keywords: Energy Markets, Time-Varying Volatility Spillovers, Volatility Impulse Response Function, Skew-Student Asymmetric BEKK

JEL Classification: C32, C58, G1, Q41

Suggested Citation

Green, Rikard and Larsson, Karl and Lunina, Veronika and Nilsson, Birger, Cross-Commodity News Transmission and Volatility Spillovers in the German Energy Markets (January 31, 2016). Available at SSRN: https://ssrn.com/abstract=2758373 or http://dx.doi.org/10.2139/ssrn.2758373

Rikard Green

Energy Quant Solutions Sweden

Ekelundsvägen 25
Lund, 22472
Sweden
0736504192 (Phone)

Karl Larsson

Örebro University ( email )

Fakultetsgatan 1
SE-701 82
Örebro, 70210
Sweden

Veronika Lunina (Contact Author)

Knut Wicksell Centre for Financial Studies, Lund University ( email )

P.O. Box 7082
S-220 07 Lund
Sweden

Birger Nilsson

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07 Lund
Sweden

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