Energy ETF return jump contagion: a multivariate Hawkes process approach. Issue 7 (3rd May 2022)

• Record Type: Journal Article
• Authors: Yang, Steve Y.; Liu, Yunfeng; Yu, Yangyang; Mo, Sheung Yin Kevin
• Is Part Of: European journal of finance. Volume 28:Issue 7(2022)
• Page Start: 761
• Page End: 783
• Publication Date: 2022-05-03
• Subjects: Energy finance -- energy ETFs -- crude oil futures -- multivariate Hawkes process -- price discovery; Finance -- Periodicals; Finance -- Europe -- Periodicals; International finance -- Periodicals; 332.094
• DOI: 10.1080/1351847X.2021.1903962
• Languages: English
• ISSNs: 1351-847X

Abstract

Abstract : Compared with investing in individual stocks, ETF investment is capable of diversifying the non-systematic risk or exposure to broad market or industry sectors. The aim of this paper is to develop a jump contagion modeling framework to understand the contagion effect of market jump events of energy sector ETFs using multivariate Hawkes process modeling approach. Through analyzing intraday high-frequency market data, we find that negative index jumps lead index price discovery processes, and their influences disappear faster than the positive index jumps in both the S&P500 and the crude oil futures. And on average, the self contagion in negative jumps is stronger than the self contagion in the positive jumps across all ETF groups. However, the ETFs focused on the master limited partnership (MLP) segment show less negative self contagion and relatively stronger positive self contagion than the other energy ETFs. Overall, the influence of negative jumps on ETFs from both the equity index and the energy future index is stronger than that of the positive jumps. And the influence of the equity index (S&P500) jump on ETFs lasts longer than that of the crude oil futures index (CLC1).