Premium
Natural gas prices and the gas storage report: Public news and volatility in energy futures markets
Author(s) -
Linn Scott C.,
Zhu Zhen
Publication year - 2004
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.10115
Subject(s) - volatility (finance) , futures contract , natural gas , economics , futures market , financial economics , natural gas prices , monetary economics , chemistry , organic chemistry
This study examines the short‐term volatility of natural gas prices through an examination of theintraday prices of the nearby natural gas futures contract traded on the New York Mercantile Exchange. Theinfluence on volatility of what many regard as a key element of the information set influencing the natural gasmarket is investigated. Specifically, we examine the impact on natural gas futures price volatility of theWeekly American Gas Storage Survey report compiled and issued by the American Gas Association during the periodJanuary 1, 1999 through May 3, 2002 and the subsequent weekly report compiled and issued by the U.S. EnergyInformation Administration after May 6, 2002. We find that the weekly gas storage report announcement wasresponsible for considerable volatility at the time of its release and that volatility up to 30 minutesfollowing the announcement was also higher than normal. Aside from these results, we document pronounced pricevolatility in this market both at the beginning of the day and at the end of the day and offer explanations forsuch behavior. Our results are robust to the manner in which the mean percentage change in the futures price isestimated and to correlation of these changes both within the day and across days. © 2004 WileyPeriodicals, Inc. Jrl Fut Mark 24:283–313, 2004