Working Papers, Department of Economics, Lund University
Cross-Commodity News Transmission and Volatility Spillovers in the German Energy Markets
(), Karl Larsson
(), Veronika Lunina
() and Birger Nilsson
Abstract: This study investigates volatility spillovers to electric
power from large exogenous shocks in the prices of gas, coal, and carbon
emission allowances in the German energy market. Our sample ranges from
2008 to 2016 and covers periods of different market conditions. We use a
general VAR-BEKK model and the volatility impulse response function
methodology to analyze and evaluate the spillover effects. Special
attention is paid to selecting an appropriate econometric volatility model.
Our results show that the spillover effects often are of a significant
magnitude and display considerable variation over time and across
commodities. Coal and gas generate non-negligible spillovers during almost
the entire sample period. Carbon has very little impact during the early
and late parts of the sample, but generates significant, and highly
variable, spillovers during the period from 2011 to the end of 2014.
Keywords: energy markets; time-varying volatility spillovers; volatility impulse response function; skew-Student asymmetric BEKK; (follow links to similar papers)
JEL-Codes: C32; C58; G10; Q41; (follow links to similar papers)
48 pages, January 13, 2016, Revised October 11, 2017
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- This paper is forthcoming as:
Green, Rikard, Karl Larsson, Veronika Lunina and Birger Nilsson, 'Cross-Commodity News Transmission and Volatility Spillovers in the German Energy Markets', Journal of Banking and Finance.
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