Return And Volatility Spillover Between Energy Commodities: Evidence From the VAR-EGARCH Model

Abstract

This study aims to examine whether there is a return and volatility spillover among energy commodities. As a result of different macroeconomic developments, return volatility in asset prices can spillover among commodities and affect each other's returns. The determination of the factors affecting the prices of energy commodities and the spillover among them is worth examining, especially for those who invest and are interested in the energy market. Within the scope of the study, the data regarding Brent Oil, Heating Oil, Natural Gas, and WTI between 01.01.2008-31.12.2020 are evaluated by VAR-EGARCH method. The results demonstrate that the information shocks, in which the returns of energy commodities interact in the short-term, spillover multidirectionally and asymmetrically in returns and volatility. It is determined that the natural gas return series is affected by the prices of other commodities, but it does not affect any energy commodities. As for the volatility spillover, there is unidirectional spillover from heating oil to natural gas series, but there is a multidirectional spillover among other commodities.

Keywords

• Energy Market
• Volatility Spillover
• VAR-EGARCH
• Energy Commodities

Enerji Emtiaları Arasında Getiri ve Volatilite Yayılımı: VAR-EGARCH Modelinden Kanıtlar

Abstract

Bu araştırmanın amacı enerji emtiaları arasında getiri ve volatilite yayılımı olup olmadığını incelemektir. Farklı makroekonomik gelişmeler neticesi varlık fiyatlarında meydana gelen getiri oynaklıkları emtialar arasında yayılım göstererek birbirlerinin getirilerini de etkileyebilmektedir. Enerji emtialarının fiyatlarını etkileyen unsurların ve aralarındaki yayılımın tespiti özellikle yatırım yapmak isteyenler ve enerji piyasası ile ilgilenenler açısından incelenmeye değer bulunmaktadır. Araştırma kapsamında 01.01.2008-31.12.2020 tarihleri arasındaki Brent Petrol, Heating Oil, Natural Gas ve WTI ham petrol verileri VAR-EGARCH yöntemiyle değerlendirilmiştir. Araştırma sonucunda enerji emtialarına ait getirilerin kısa dönemli etkileşim halinde olduğu bilgi şoklarının getiri ve volatilitede çoklu ve asimetrik olarak yayıldığı görülmüştür. Doğalgaz getiri serisinin diğer emtiaların fiyatlarından etkilendiği fakat kendisinin hiçbir enerji emtiasını etkilemediği ayrıca tespit edilmiştir. Volatilite yayılımında ise ısıtma yağından doğalgaz serilerine tek taraflı diğer emtialar arasında karşılıklı yayılım olduğu sonucuna varılmıştır.

Keywords

• Enerji Piyasası
• Volatilite Yayılımı
• VAR-EGARCH
• Enerji Emtiaları.

References

1. Ahmed, A. Huo, R. (2020). Volatility Transmissions Across International Oil Market Commodity Futures and Stock Markets: Empirical Evidence from China, Energy Economics,https://sci-hub.se/10.1016/j.eneco.2020.104741.Doı: 10.1016/j.eneco 2020. 104741.
2. Azevedo, T. C. Aiube, F.L. Samanez, C.P. Bisso, C.S. Costa, L. A. (2015). The Behavior Of West Texas Intermediate Crude-Oil And Refined Products Prices Volatility Before And After The 2008 Financial Crisis: An Approach Through Analysis Of Futures Contracts, Revista Chilena De İngeniería, Vol. 23 N: 3, pp: 395-405. sci-hub.se/10.4067/s0718-33052015000300008.
3. Arouri, M.E. Lahiani, A. Nguyen, D.K. (2011). Return and Volatility Transmission Between World Oil Prices and Stock Markets of The GCC Countries., Economic Modelling, Volume:28, Issue:4, July, pp:1815-1825. doi: 10.1016/j.econmod.2011.03.012.
4. Akhtaruzzaman M.D. Boubaker, S. Şensoy, A. (2020). Financial Contagion During COVİD-19 Crisis, Finance Research Letters, May, pp:1-37. https://doi.org/10.1016/j.frl.2020.101604.
5. Balli, F. Basher, S.A. Louis, J.R. (2013). Sectoral Equity Returns and Portfolio Diversi fication Opportunities Across the GCC Region, International Financial Markets, Institutions and Money Vol: 25, pp: 33–48. https://doi.org/10.1016/j.intfin.2013.01.001.
6. Brown, S.P.A. Yücel, M.K. (2007). What Drives Natural Gas Prices? Federal Reserve of Bank.
7. Brooks, C. (2008). Introductory Econometrics for Finance, Second Edition, Cambrıdge Unıversıty Press, NewYork.
8. Bhowmik, R. Wang, S. (2020). Stock Market Volatility and Return Analysis: A Systematic Literature Review, Entropy,22,522,pp:1-18. https://doi.org/10.3390/e22050522.

9. Bollerslev, T. (1986). Generalızed Autoregressıve Condıtıonal Heteroskedastıcıty‖. Journal of Econometrics, Vol.31, (307-327). https://doi.org/10.1016/0304-4076(86)90063-1.
10. Chen, Y. QU, Fang. LI, Wenqi. Chen, Minghui. (2019). Volatılıty Spıllover And Dynamıc Correlatıon Between The Carbon Market And Energy Markets, Journal of Business Economics and Management, Volume 20 Issue 5,pp: 979–999. https://doi.org/10.3846/jbem.2019.10762.
11. Chen, Y. Li, Wengi. Jin, Xi. (2018). Volatility Spillovers between Crude Oil Prices and New Energy Stock Price in China, Romanian Journal of Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pp: 43-62. Corpus ID: 158671543.
12. Chang, C. W. Hwang, Z. J. Huang, B.N. (2002). An Analysis of Factors Affecting Price Volatility of The U.S. Oil Market, Energy Economics, V:24, pp: 107-119. https://doi.org/10.1016/S0140-9883(01)00092-5.
13. Chang, L. C. Mcaleer, M. Tansuchat, R. (2009). Volatility Spillovers Between Returns On Crude Oil Futures and Oil Company Stocks, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1406983,. ePEc:cfi:fseres:cf157.
14. Çelik, İ. Kahyaoğlu, B.S. (2021). Financial Time Series Analysis, Basic Approaches for Financiers, Gazi Publishing House, March, Ankara.
15. Dikkaya, M. Rzali, S. (2020). The Effects of the Coronavirus Pandemic (COVID-19) on Global Energy Markets: A Political Economy Analysis, Economic and Social Transformation on the Axis of COVID-19, Chapter 15, Nobel Publishing, pp:395- 417.
16. Devpura, N. Narayan, K.P. (2020). Hourly Oil Prices Volatility: The Role of COVİD-19, Energy ReseARCH Letters, Vol: 1, Issue (2), pp:1-5. https://doi.org/10.46557/001c.13683.
17. EİA, (2020) Factors Affecting Natural Gas Prices, https://www.eia.gov/energyexplained/natural-gas/factors-affecting-natural-gas-prices, Erişim Tarihi:26.04.2021.
18. EİA, (2021). Energy Consumption By Sector, https://www.eia.gov/totalenergy/ data/browser/index.php?tbl=T02.01#/?f=M&start=200001&end=202102&charted=6-9-12.
19. Ewing, T. B. Malik, F. Özfidan, Ö. (2002). Volatility Transmission In The Oil And Natural Gas Markets, Energy Economics, Vol:24,pp:525-538. https://doi.org/10.1016/S0140-9883(02)00060-9.
20. Efimova, O. & Serletis, A. (2014). Energy Markets Volatility Modelling Using GARCH. Energy Economics, V:43, pp: 264–273. DOI: 10.1016/j.eneco.2014.02.018.
21. Geng, B. J. Chen, F. R. Ji, Q. Liu, B.Y. (2020). Network Connectedness Between Natural Gas Markets Uncertainty and Stock Markets, Energy Economics, V: 10, pp:2-48. https://doi.org/10.1016/j.eneco.2020.105001.
22. Green, R. Larsson, K. Lunina, V. & Nilsson, B. (2017). Cross-Commodity News Transmission and Volatility Spillovers İn The German Energy Markets. Journal of Banking & Finance. https://doi.org/10.1016/j.jbankfin.2017.10.004
23. Gilmore, G.C. Mcmanus, M, G. (2002). International Portfolio Diversification: US And Central European Equity Markets, Emerging Markets Review, Vol: 3, pp:69-83. https://doi.org/10.1016/S1566-0141(01)00031-0.
24. Global Energy Review, (2021). https://www.worldenergy.org.tr/global-energy-review-2021/, Nisan.
25. Hammoudeh, S. Li, H. & Jeon, B. (2003). Causality And Volatility Spillovers Among Petroleum Prices Of WTI, Gasoline And Heating Oil İn Different Locations, The North American Journal of Economics and Finance, Vol:14(1),pp: 89–114. https://doi.org/10.1016/S1062-9408(02)00112-2.
26. IEA, (2020). Major Dilemmas Facing Oil and Gas Producers, And Risks To İnvestment, World Energy Outlook 2020, Flagship Report, October, https://www.iea.org/reports/world-energy-outlook-2020.
27. İğde, E. (2010). “Unit Root Tests under Structural Change and Applications on Some Macroeconomic Variables”. MA Thesis, Çukurova University Institute of Social Sciences, Adana.
28. Lee, T. K. & Zyren, J. (2007). Volatility Relationship between Crude Oil and Petroleum Products. Atlantic Economic Journal, Vol:35(1), pp: 97–112. Doı: 10.1007/s11293-006-9051-9.
29. Manuca R. Savit, R. (1996). Stationarity and Non-Stationarity In The Time Series Analysis, Pyshica D, Vol:99, pp:134-161. https://doi.org/10.1016/S0167-2789(96)00139-X.
30. Nandha, M. Faff, R. (2008). Does Oil Move Equity Prices?A Global View, Energy Economics V:30,PP: 986–997. https://doi.org/10.1016/j.eneco.2007.09.003.
31. Narayan P. K. (2020). Oil Price News And COVİD-19- Is There Any Connection?, Energy Research Letters,1(1),pp:1-5. https://doi.org/10.46557/001c.13176.
32. Karali, B. Ramirez, O. A. (2014). Macro Determinants Of Volatility And Volatility Spillover İn Energy Markets,Energy Economics, 46,pp:413-421. Doi: 10.1016/J.Eneco.2014.06.004.
33. Kuttu, S. (2014). Return and Volatility Dynamics Among Four African Equity Markets: A Multivariate VAR-EGARCH Analysis, Global Finance Journal,pp:1-14. https://doi.org/10.1016/j.gfj.2014.03.001.
34. Kutlar, A. (2017). Eviews İle Uygulamalı Zaman Serileri, Umuttepe Yayınları,Baskı:1, Nisan,Kocaeli. Kingsly, K. Henri, K. (2020). COVİD-19 And Oil Prices, https://papers.ssrn. com/sol3/papers.cfm?abstract_id=3555880. https://dx.doi.org/10.2139/ssrn.3555880.
35. Lukaszewska, H. N. Aruga, K. (2020). Energy Prices and COVID-19 Immunity: The Case of Crude Oil and Natural Gas Prices in the US and Japan, Energies, V:13, pp:1-17. doi:10.3390/en13236300.
36. Liu, Y. Failler, P. Peng, J. Zheng, Y. (2020). Time-Varying Relationship between Crude Oil Price and Exchange Rate in the Context of Structural Breaks, Energies, V: 13(9), pp:1-17. https://doi.org/10.46557/001c.13154.
37. Lin, B. & Li, J. (2015). The Spillover Effects Across Natural Gas and Oil Markets: Based on the VEC–MGARCH Framework, Applied Energy, V:155, pp: 229–241. https://doi.org/10.1016/j.apenergy.2015.05.123.
38. Mantalos, P. Shukur, G. (2010). The Effect Of Spillover On The Granger Causality Test, Journal of Applied Statistics Vol. 37, No. 9, September, 1473–1486. https://doi.org/10.1080/02664760903046094.
39. Ping, L. Ziyi, Z. Tianna, Y. & Qingchao, Z. (2018). The Relationship Among China’s Fuel Oil Spot, Futures And Stock Markets, Finance Research Letters, V: 24, pp:151–162. https://doi.org/10.1016/j.frl.2017.09.001.
40. Sita, B. B. Abosedra, S. (2012), Volatility Spillovers: Evidence on U.S. Oil Product Markets, The Journal of Applied Business ReseARCH November/ December V:28, N:6, pp: 1237-1242. Doı. https://doi.org/10.19030/jabr.v28i6.7339
41. Yang, C. W. Hwang, M. J. & Huang, B. N. (2002). An Analysis of Factors Affecting Price Volatility of The US Oil Market. Energy Economics, 24(2), pp: 107–119. https://doi.org/10.1016/S0140-9883(01)00092-5.
42. Who, (2020)? Who Annouces COVİD-19 Outbreak a Pandemic, https://www.euro.who .int/en/health-topics/health-emergencies/coronavirus-covid-9/news/news/2020/3/who-annou ces-covid-19-outbreak-a-pandemic?
43. Wang, Y. & Guo, Z. (2018). The Dynamic Spillover Between Carbon and Energy Markets: New Evidence. Energy, Vol:149, PP:24–33. https://doi.org/10.1016/j.energy.2018.01.145.
44. Wei, C, C. Chen, C, H. (2014). "Does WTI Oil Price Returns Volatility Spillover to the Exchange Rate and Stock Index in the US?," International Journal of Energy Economics and Policy, Econjournals, Vol. 4(2), pp: 189-197. RePEc: eco: journ2:2014-02-9.
45. Villar, J.A. ve Joutz, F.L. (2006). The Relationship Between Crude Oil and Natural Gas Prices, Energy Information Administration, Office of Oil and Gas.http://aceer.uprm.edu/aceer/pdfs/CrudeOil_NaturalGas.pdf.
46. Wilmot, N, A. (2014). Volatility Spillovers in North American Energy Markets, https://www.iaee.org/en/publications/proceedingsabstractpdf.aspx?id=13123.
47. Xiarchos, M. I. Burnett, J. W. (2018). Dynamıc Volatılıty Spıllovers Between Agrıcultural and Energy Commodıtıes, Journal of Agricultural and Applied Economics, 50, 3 (2018): 291–318. https://doi.org/10.1017/aae.2017.34.
48. Zhang, Y. J. Sun Y.F. (2016), The Dynamic Volatility Spillover Between Europan Carbon Trading Market and Fossil Energy Market, Journal of Cleaner Production, 112, pp:2654-2663. https://dx.doi.org/10.1016/j.jclepro.2015.09.118.
49. Zhang, W. Amori, S. (2021). Crude Oil Market and Stock Markets During The COVID-19 Pandemic: Evidence from the US, Japan, And Germany, International Review of Financial Analysis, 74, PP:1-13. doi: 10.1016/j.irfa.2021.101702.