Do Daily Retail Gasoline Prices Adjust Asymmetrically?

Tinbergen Institute Discussion Paper No. TI 2005-040/2

32 Pages Posted: 18 May 2005

See all articles by Leon J.H. Bettendorf

Leon J.H. Bettendorf

Erasmus University Rotterdam (EUR)

Stephanie Van der Geest

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business

Date Written: April 2005

Abstract

This paper analyzes adjustments in the Dutch retail gasoline prices. We estimate an error correction model on changes in the daily retail price for gasoline (taxes excluded) for the period 1996-2004 taking care of volatility clustering by estimating an EGARCH model. It turns out the volatility process is asymmetrical: an unexpected increase in the producer price has a larger effect on the variance of the producer price than an unexpected decrease. We do not find strong evidence for amount asymmetry. However, there is a faster reaction to upward changes in spot prices than to downward changes in spot prices. This implies timing or pattern asymmetry. This asymmetry starts three days after the change in the spot price and lasts for four days.

Keywords: Asymmetry, retail gasoline prices, volatility

JEL Classification: D43, E31

Suggested Citation

Bettendorf, Leon J.H. and Van der Geest, Stephanie and Kuper, Gerard H., Do Daily Retail Gasoline Prices Adjust Asymmetrically? (April 2005). Tinbergen Institute Discussion Paper No. TI 2005-040/2, Available at SSRN: https://ssrn.com/abstract=722475 or http://dx.doi.org/10.2139/ssrn.722475

Leon J.H. Bettendorf (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 4081808 (Phone)

Stephanie Van der Geest

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

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