Journal article
Spillovers and directional predictability between international energy commodities and their implications for optimal portfolio and hedging
The North American journal of economics and finance, v 62, 101715
Nov 2022
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
•There is a significant directional predictability from most of energy commodities to the OPEC basket and the very light Tapis crude oil.•Predictability for both directions is enabled only between the light Brent and the light WTI and between the OPEC basket and the Malaysian Tapis.•Predictability is more accented for a one lagged day and in the upper quantiles.•Malaysian TAPIS can be a good hedging vehicle for other major energy markets.•There is a reduction of portfolio risk through diversification between two different oil regions.
This study sheds a new light on the dependence and the directional predictability between eight major energy price returns, using the Cross-Quantilogram (CQ) and the Partial CQ (PCQ) analysis. The energy prices cover the time series for the U.S. natural gas and seven internationally traded crude oil types. The results reveal a significant directional predictability running from most of energy commodities returns to the OPEC basket and the very light Tapis crude oil returns. However, the quantile predictability in both directions is enabled only for the relations between the light Brent and the light WTI, and between the OPEC basket and the Malaysian Tapis. The time-varying predictability analysis reveals that there is a significant upper quantile dependence between these international energy commodities. Finally, we find that the TAPIS can be a good hedging vehicle for other energy markets. These findings may be instructive for both policymakers (in terms of financial stability) and market participants (in terms of performance).
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Details
- Title
- Spillovers and directional predictability between international energy commodities and their implications for optimal portfolio and hedging
- Creators
- Nader Trabelsi - Islamic UniversityAviral Kumar Tiwari - Indian Institute of Management (IIM) Bodh Gaya, Bodh Gaya, IndiaShawkat Hammoudeh - Drexel University
- Publication Details
- The North American journal of economics and finance, v 62, 101715
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000816974900004
- Scopus ID
- 2-s2.0-85131679511
- Other Identifier
- 991019167834204721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics