Heterogeneous Causal Relationships between Spot and Futures Oil Prices: Evidence from Quantile Causality Analysis

The causal relationships between spot and futures crude oil prices have attracted the attention of many researchers in the past several decades. Most of the studies, however, do not distinguish among the various oil market situations in analyses of linear and nonlinear causalities. In light of the f...

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Main Authors: Xianfang Su, Huiming Zhu, Xinxia Yang
Format: Article
Language:English
Published: MDPI AG 2019-03-01
Series:Sustainability
Subjects:
Online Access:http://www.mdpi.com/2071-1050/11/5/1359
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spelling doaj-5f00a8af39504688aebf99631ce4d6282020-11-24T23:31:33ZengMDPI AGSustainability2071-10502019-03-01115135910.3390/su11051359su11051359Heterogeneous Causal Relationships between Spot and Futures Oil Prices: Evidence from Quantile Causality AnalysisXianfang Su0Huiming Zhu1Xinxia Yang2School of Big Data Application and Economics, Guizhou University of Finance and Economics, Guiyang 550004, ChinaCollege of Business Administration, Hunan University, Changsha 410082, ChinaSchool of Mathematics and Statistics, Guizhou University of Finance and Economics, Guiyang 550004, ChinaThe causal relationships between spot and futures crude oil prices have attracted the attention of many researchers in the past several decades. Most of the studies, however, do not distinguish among the various oil market situations in analyses of linear and nonlinear causalities. In light of the fact that a booming or depressing oil market produces heterogeneous investment behaviors, this study applied a quantile causality framework to capture different causalities across various quantile levels and found that the causal relationships between crude oil spot and futures prices significantly derive from tail quantile intervals and appear as heterogeneous effects. Before the Iraq War, crude oil spot and futures prices were mutually Granger-caused at lower quantile levels, and only futures prices led spot prices at upper quantile levels. Since the war, a clear bidirectional causality has existed at the upper quantile levels, but only in lower quantile levels have futures prices led spot prices. These results provide useful information to investors using crude spot or futures prices to hedge or manage downside or upside risks in their portfolios.http://www.mdpi.com/2071-1050/11/5/1359crude oil marketfutures priceheterogeneous relationshipquantile causality test
collection DOAJ
language English
format Article
sources DOAJ
author Xianfang Su
Huiming Zhu
Xinxia Yang
spellingShingle Xianfang Su
Huiming Zhu
Xinxia Yang
Heterogeneous Causal Relationships between Spot and Futures Oil Prices: Evidence from Quantile Causality Analysis
Sustainability
crude oil market
futures price
heterogeneous relationship
quantile causality test
author_facet Xianfang Su
Huiming Zhu
Xinxia Yang
author_sort Xianfang Su
title Heterogeneous Causal Relationships between Spot and Futures Oil Prices: Evidence from Quantile Causality Analysis
title_short Heterogeneous Causal Relationships between Spot and Futures Oil Prices: Evidence from Quantile Causality Analysis
title_full Heterogeneous Causal Relationships between Spot and Futures Oil Prices: Evidence from Quantile Causality Analysis
title_fullStr Heterogeneous Causal Relationships between Spot and Futures Oil Prices: Evidence from Quantile Causality Analysis
title_full_unstemmed Heterogeneous Causal Relationships between Spot and Futures Oil Prices: Evidence from Quantile Causality Analysis
title_sort heterogeneous causal relationships between spot and futures oil prices: evidence from quantile causality analysis
publisher MDPI AG
series Sustainability
issn 2071-1050
publishDate 2019-03-01
description The causal relationships between spot and futures crude oil prices have attracted the attention of many researchers in the past several decades. Most of the studies, however, do not distinguish among the various oil market situations in analyses of linear and nonlinear causalities. In light of the fact that a booming or depressing oil market produces heterogeneous investment behaviors, this study applied a quantile causality framework to capture different causalities across various quantile levels and found that the causal relationships between crude oil spot and futures prices significantly derive from tail quantile intervals and appear as heterogeneous effects. Before the Iraq War, crude oil spot and futures prices were mutually Granger-caused at lower quantile levels, and only futures prices led spot prices at upper quantile levels. Since the war, a clear bidirectional causality has existed at the upper quantile levels, but only in lower quantile levels have futures prices led spot prices. These results provide useful information to investors using crude spot or futures prices to hedge or manage downside or upside risks in their portfolios.
topic crude oil market
futures price
heterogeneous relationship
quantile causality test
url http://www.mdpi.com/2071-1050/11/5/1359
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AT huimingzhu heterogeneouscausalrelationshipsbetweenspotandfuturesoilpricesevidencefromquantilecausalityanalysis
AT xinxiayang heterogeneouscausalrelationshipsbetweenspotandfuturesoilpricesevidencefromquantilecausalityanalysis
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