Publication detail

Vacha, L. Barunik, J.: Comovement of energy commodities revisited: Evidence from wavelet coherence analysis

Author(s): doc. PhDr. Jozef Baruník Ph.D.,
Mgr. Lukáš Vácha Ph.D.,
Type: Articles in journals with impact factor
Year: 2012
Number: 0
ISSN / ISBN:
Published in: Energy Economics 34(1), pp. 241–247 PDF
Publishing place:
Keywords: Correlation, Co-movement, Wavelet analysis, Wavelet coherence
JEL codes:
Suggested Citation: Vacha, L. Barunik, J. (2012): Co-movement of energy commodities revisited: Evidence from wavelet coherence analysis, Energy Economics 34(1), pp. 241–247
Abstract: In this paper, we contribute to the literature on energy market co-movement by studying its dynamics in the time-frequency domain. The novelty of our approach lies in the application of wavelet tools to commodity market data. A major part of economic time series analysis is done in the time or frequency domain separately. Wavelet analysis combines these two fundamental approaches allowing study of the time series in the time- frequency domain. Using this framework, we propose a new, model-free way of estimating time-varying cor- relations. In the empirical analysis, we connect our approach to the dynamic conditional correlation approach of Engle (2002) on the main components of the energy sector. Namely, we use crude oil, gasoline, heating oil, and natural gas on a nearest-future basis over a period of approximately 16 and 1/2 years beginning on November 1, 1993 and ending on July 21, 2010. Using wavelet coherence, we uncover interesting dynamics of correlations between energy commodities in the time-frequency space.
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