Institute of Information Theory and Automation

Publication details

Co-movement of energy commodities revisited: Evidence from wavelet coherence analysis

Journal Article

Vácha Lukáš, Baruník Jozef


serial: Energy Economics vol.34, 1 (2012), p. 241-247

research: CEZ:AV0Z10750506

project(s): GA402/09/0965, GA ČR, GD402/09/H045, GA ČR, GAP402/10/1610, GA ČR

keywords: Correlation, Co-movement, Wavelet analysis, Wavelet coherence

abstract (eng):

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 separate- ly. 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 correlations. In the empirical analysis, we connect our approach to the dynamic conditional correla- tion approach of Engle (2002) on the main components of the energy sector. Namely, we use crude oil, gas- oline, 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.

RIV: AH

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Last modification: 21.12.2012
Institute of Information Theory and Automation