The Relationship between Information Flow and Energy Futures Volatility

Review of Futures Markets, Vol. 16, No. 3, pp. 271-300, 2008

37 Pages Posted: 17 Dec 2009

See all articles by Eric Girard

Eric Girard

Siena College - School of Business

Amit K. Sinha

Bradley University

Rita Biswas

University at Albany - SUNY

Date Written: 2008

Abstract

We investigate the relationship between volatility and volume in five energy commodity futures contracts traded at the NYMEX for the period 1992 to 2006. We find that conditional volatility shows a high response to large information shocks and exhibits a great sensitivity to total expected and unexpected volume. We note a negative relationship between expected volume and volatility in several contracts which may be attributed to the relative inefficiency about information dissemination and trading of those contracts. Our findings are consistent with the Sequential Information Arrival Hypothesis and show support for the Difference in Opinion theory.

Keywords: Commodity Futures, Volatility, Volume, Sequential Information Arrival Hypothesis, Difference in Opinion Theory

JEL Classification: G14

Suggested Citation

Girard, Eric and Sinha, Amit K. and Biswas, Rita, The Relationship between Information Flow and Energy Futures Volatility (2008). Review of Futures Markets, Vol. 16, No. 3, pp. 271-300, 2008, Available at SSRN: https://ssrn.com/abstract=1522272

Eric Girard (Contact Author)

Siena College - School of Business ( email )

Siena Hall 301
515 Loudon Road
Loudonville, NY 12211-1462
United States

Amit K. Sinha

Bradley University ( email )

1501 West Bradley Avenue
Peoria, IL 61625
United States
3096773582 (Phone)

Rita Biswas

University at Albany - SUNY ( email )

1400 Washington Ave.
Albany, NY 12222
United States
518-442-4996 (Phone)
518-442-3045 (Fax)

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