Mohamad, Azhar (2025) Price discovery and time-varying causality dynamics in energy markets: futures versus ETFs. Computational Economics, 2025. pp. 1-25. ISSN 0921-2736 E-ISSN 1572-9974
|
PDF (Price Discovery and Time-Varying Causality Dynamics in Energy Markets: Futures Versus ETFs)
- Published Version
Available under License Creative Commons Attribution No Derivatives. Download (2MB) | Preview |
Abstract
This paper investigates price discovery and time-varying causality between energy futures and exchange-traded funds (ETFs) across three major markets: WTI crude oil, natural gas, and gasoline. Drawing on a unique dataset spanning almost two decades, the analysis employs rolling Information Leadership Share (ILS) measures with Monte Carlo simulation bands and recursive time-varying Granger causality (TVGC) tests to trace the evolution of leadership dynamics between ETFs and their underlying assets. The results provide novel empirical evidence that futures generally dominate price discovery under stable market conditions, reflecting their superior liquidity and informational efficiency. In contrast, ETFs assume a more prominent role during episodes of market turbulence, such as the 2014-2016 oil price collapse and the COVID-19 crisis, where they shift from being passive followers to active price setters. Bidirectional, time-varying causality emerges in the WTI–USO and natural gas–UNG pairs, particularly during crisis periods, whereas gasoline markets exhibit a more conventional futures-led process. The study contributes to applied computational economics by illustrating how simulation-based and recursive estimation methods can uncover dynamic leadership patterns in financial markets. It further advances the understanding of financialisation in commodity markets, offering insights into how ETFs reshape information transmission during periods of heightened uncertainty.
| Item Type: | Article (Journal) |
|---|---|
| Additional Information: | The journal is indexed in Scopus and WOS; however, the article has not yet been indexed as of 15 December 2025. It was published online first. -LAH |
| Uncontrolled Keywords: | Price discovery, time-varying causality, energy futures, energy ETF, crude oil. |
| Subjects: | H Social Sciences > HG Finance > HG4501 Stocks, investment, speculation |
| Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): | Kulliyyah of Economics and Management Sciences Kulliyyah of Economics and Management Sciences > Department of Finance |
| Depositing User: | Dr Azhar Mohamad |
| Date Deposited: | 15 Dec 2025 11:50 |
| Last Modified: | 15 Dec 2025 11:50 |
| Queue Number: | 2025-12-Q885 |
| URI: | http://irep.iium.edu.my/id/eprint/125779 |
Actions (login required)
 |
View Item |
Download Statistics
Download Statistics