Shock Propagation Across the Futures Term Structure: Evidence from Crude Oil Prices

Détails

ID Serval
serval:BIB_BE3C4A014685
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Institution
Titre
Shock Propagation Across the Futures Term Structure: Evidence from Crude Oil Prices
Périodique
The Energy Journal
Auteur(s)
Lautier D.H., Raynaud F., Robe M.A.
ISSN
0195-6574
Statut éditorial
Publié
Date de publication
2019
Peer-reviewed
Oui
Volume
40
Numéro
3
Langue
anglais
Résumé
To what extent are futures prices interconnected across the maturity curve? Where in the term structure do price shocks originate, and which maturities do they reach? We propose a new approach, based on information theory, to study these cross-maturity linkages and the extent to which connectedness is impacted by market events. We introduce the concepts of backward and forward information flows, and propose a novel type of directed graph, to investigate the propagation of price shocks across the WTI term structure. Using daily data, we show that the mutual information shared by contracts with different maturities increases substantially starting in 2004, falls back sharply in 2011-2014. and recovers thereafter. Our findings point to a puzzling re-segmentation by maturity of the WTI market in 2012-2014. We document that, on average, short-dated futures emit more information than do backdated contracts. Importantly, however, we also show that significant amounts of information flow backwards along the maturity curve-almost always from intermediate maturities, but at times even from fardated contracts. These backward flows are especially strong and far-reaching amid the 2007-2008 oil price boom/bust.
Mots-clé
Mutual information, Market integration, Information entropy, Shock propagation, Directed graphs, Term structure, Futures, Crude oil, WTI
Web of science
Création de la notice
23/05/2019 8:32
Dernière modification de la notice
20/08/2019 16:32
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