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to weather, seasonality, and supply disruptions strengthen the price relationship between these two commodities. When the …
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In this paper we investigate the time-varying relationship between oil and natural gas in the UK. We develop a model where relative prices can move between pricing-regimes; markets switch between being decoupled and integrated. Our model endogenously accounts for periods where oil and natural...
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, conventional linear models of price dynamics such as the Vector Error Correction Model (VECM) can lead to erroneous inferences … about cointegration relationships, price adjustments and relative values. We propose the use of regime-switching models to … address these issues. Our regime switching model uses price data to infer whether pricing is oil-driven (integrated) or gas …
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