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Examining Asymmetric Behavior in US Petroleum Futures and Spot Prices

Bradley T. Ewing, Shawkat M. Hammoudeh and Mark A. Thompson

Year: 2006
Volume: Volume 27
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No3-2
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Abstract:
This paper uses the momentum-threshold autoregressive (M-TAR) model to examine the possible asymmetric relationship between petroleum futures and spot prices for three different markets: crude oil, heating oil, and gasoline in the United States. The results indicate that the futures and spot prices for each petroleum type are cointegrated when allowing for asymmetric adjustment for each of these energy markets. We further investigate the asymmetric behavior between the futures and spot prices by estimating the M-TAR error-correction model. The M-TAR model allows us to document the adjustments that these markets undergo in response to changes in the basis.



Threshold Cointegration Analysis of Crude Oil Benchmarks

Shawkat M. Hammoudeh, Bradley T. Ewing and Mark A. Thompson

Year: 2008
Volume: Volume 29
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No4-4
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Abstract:
The paper examines the dynamic relationship between pairs of four oil benchmark prices (i.e., West Texas Intermediate, Brent, Dubai, and Maya), which have different physical properties and locations. The results indicate that there is a long-run equilibrium relationship between different benchmarks, regardless of their properties and locations. More importantly, there is asymmetry in the adjustment process that is specifically modeled and implications are discussed.





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