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Energy, Entropy, and Economic Analysis: Some New Directions

David A. Huettner

Year: 1981
Volume: Volume 2
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol2-No2-8
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Abstract:
The relationships between energy analysis, entropy analysis, and economic analysis have been intensely debated over the past decade, and a variety of conflicting claims have been made concerning the strengths and weaknesses of each approach. Recent articles' indicate a growing general agreement that energy content valuation is an energy theory of value, and that net energy, entropy, and economic analysis all reach different conclusions.



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

Delphine H. Lautier, Franck Raynaud, and Michel A. Robe

Year: 2019
Volume: Volume 40
Number: Number 3
DOI: 10.5547/01956574.40.3.dlau
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Abstract:
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 far-dated contracts. These backward flows are especially strong and far-reaching amid the 2007-2008 oil price boom/bust.





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