Weather, storage, and natural gas price dynamics: fundamentals and volatility

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    84 Citations (Scopus)

    Abstract

    This paper examines how weather shocks impact asset price dynamics in the US natural gas futures market. The empirical results reveal a significant weather effect on both the conditional mean and the conditional volatility of natural gas futures returns. Combined with the evidence that the volatility is considerably higher on Monday and the day when the natural gas storage report is released, these findings suggest that information about market fundamentals is an important determinant of natural gas volatility. In addition, this paper also provides support for the “Samuelson effect” that commodity futures volatility declines with contract horizon.
    Original languageEnglish
    Pages (from-to)46-63
    Number of pages18
    JournalEnergy Economics
    Volume29
    Issue number1
    DOIs
    Publication statusPublished - 2007

    Keywords

    • Natural gas
    • prive volatility
    • storage
    • weather

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