Dynamic Spillover Effects across Petroleum Spot and Futures Volatilities, Trading Volume and Open Interest

35 Pages Posted: 26 May 2017

See all articles by Georgios Magkonis

Georgios Magkonis

University of Bradford

Dimitris A. Tsouknidis

Athens University of Economics and Business

Date Written: May 2017

Abstract

This paper examines the existence of dynamic spillover effects across petroleum based commodities and among spot-futures volatilities, trading volume and open interest. Realized volatilities of spot-futures markets are used as inputs to estimate a VAR model following (Diebold and Yilmaz, 2015, 2012, 2009; Diebold and Yılmaz, 2014) and distinguish dynamic spillovers in total and net effects. Results reveal the existence of large and time-varying spillovers among the spot-futures volatilities and across petroleum-based commodities when examined pairwise. In addition, speculative pressures, as reflected by futures trading volume, and hedging pressures, as reflected by open interest, are shown to transmit large and persistent spillovers to the spot and futures volatilities of crude oil and heating oil-gasoline markets, respectively.

Keywords: Dynamic Spillovers, Spot and Futures Markets, Petroleum Markets, Trading Volume, Open Interest

JEL Classification: G11, G12, G20

Suggested Citation

Magkonis, Georgios and Tsouknidis, Dimitris A., Dynamic Spillover Effects across Petroleum Spot and Futures Volatilities, Trading Volume and Open Interest (May 2017). Available at SSRN: https://ssrn.com/abstract=2973743 or http://dx.doi.org/10.2139/ssrn.2973743

Georgios Magkonis

University of Bradford

Bradford
Bradford, BD9 4JL
United Kingdom

Dimitris A. Tsouknidis (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
GR-104 34 Athens
Greece

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