Trading time seasonality in commodity futures: An opportunity for arbitrage in the natural gas and crude oil markets?

Christian-Oliver Ewald, Erik Haugom, Gudbrand Lien, Ståle Størdal and Yuexiang Wu

Energy Economics, 2022, vol. 115, issue C

Abstract: In this paper we investigate energy futures contracts and the presence of a type of seasonality, that has been given very little to no attention in the literature —- we call it trading time seasonality. Such seasonality is exposed through the futures trading time, not its maturity time, nor the underlying spot price. As we show, it can be linked to seasonality in the pricing kernel, but the latter cannot explain it fully. Its relationship to arbitrage and CAPM violation is investigated, and its presence is confirmed for natural gas and crude oil futures markets using descriptive analysis, Kruskal–Wallis testing and CAPM methodology. We provide an informal discussion around possible reasons for the effect and identify seasonal hedging pressure and market sentiments as such.

Keywords: Futures; Crude oil; Natural gas; Seasonality; Arbitrage (search for similar items in EconPapers)
JEL-codes: G12 G13 Q41 Q49 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:115:y:2022:i:c:s0140988322004534

DOI: 10.1016/j.eneco.2022.106324

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