The present research aims to examine the lead-lag relationship between spot and futures markets of the most representative energy sources; crude oil, heating oil natural gas and gasoline from 1979 to 2013. A key feature of the study is the examination of the relationship between spot and futures markets under different scenarios including oil shocks, business cycle and transaction costs through the use of the Vector Error Correction Model (VECM). Additionally, a ratio of speed of adjustment was built following Ammer and Cai in order to establish the market contribution that both spot and futures market have on price innovation. The empirical findings indicate an important leadership and contribution of futures market toward price discovery regardless from oil shocks, business cycle and transaction costs. Nevertheless, over the business cycle and improvement on spot markets in the contribution to price discovery is observed during recession periods than over expansion ones.

Ammer, J., & Cai, F. (2011). Sovereign CDS and bond pricing dynamics in emerging markets: Does the cheapest-to-deliver option matter? Journal of International Financial Markets, Institutions and Money, 21(3), 369-387.
Bekiros, S. D., & Diks, C. G. (2008). The relationship between crude oil spot and futures prices: Cointegration, linear and nonlinear causality. Energy Economics, 30(5), 2673-2685.
Belousova, J., & Dorfleitner, G. (2012). On the diversification benefits of commodities from the perspective of euro investors. Journal of Banking & Finance, 36(9), 2455-2472.
Bhar, R., & Hammoudeh, S. (2011). Commodities and financial variables: Analyzing relationships in a changing regime environment. International Review of Economics & Finance, 20(4), 469-484.
Black, F. (1976). The pricing of commodity contracts. Journal of Financial Economics, 3(1), 167-179.
Bopp, A. E., & Lady, G. M. (1991). A comparison of petroleum futures versus spot prices as predictors of prices in the future. Energy Economics, 13(4), 274-282.
Bowe, M., & Domuta, D. (2001). Foreign investor behaviour and the Asian financial crisis. Journal of International Financial Markets, Institutions and Money, 11(3), 395-422.
Brailsford, T. J., Frino, A., Hodgson, A., & West, A. (1999). Stock market automation and the transmission of information between spot and futures markets. Journal of Multinational Financial Management, 9(3), 247-264.
Brennan, M. J. (1958). The supply of storage. American Economic Review, 48(1), 50-72.
Brown, S., & Yücel, M. K. (2002). Energy prices and aggregate economic activity: An interpretative survey. The Quarterly Review of Economics and Finance, 42(2), 193-208.
Büyükşahin, B., & Harris, J. H. (2011). Do speculators drive crude oil futures prices? Energy Journal, 32(2), 167-229.
Chan, K. (1992). A further analysis of the lead-lag relationship between the cash market and stock index futures market. Review of Financial Studies, 5(1), 123-152.
Chen*, A.-S., & Wuh Lin, J. (2004). Cointegration and detectable linear and nonlinear causality: analysis using the London Metal Exchange lead contract. Applied Economics, 36(11), 1157-1167.
Chiou-Wei, S.-Z., Linn, S. C., & Zhu, Z. (2013). The response of US natural gas futures and spot prices to storage change surprises: Fundamental information and the effect of escalating physical gas production. Journal of International Money and Finance, 42(0), 156-173.
Cho, D. W., & McDougall, G. S. (1990). The supply of storage in energy futures markets. Journal of Futures Markets, 10(6), 611-621.
Chu, Q. C., Hsieh, W.-l. G., & Tse, Y. (1999). Price discovery on the S&P 500 index markets: An analysis of spot index, index futures, and SPDRs. International Review of Financial Analysis, 8(1), 21-34.
Cootner, P. H. (1960). Returns to speculators. Journal of Political Economy, 68(4), 396-418.
Fama, E. F., & French, K. R. (1988). Business cycles and the behavior of metals prices. The Journal of Finance, 43(5), 1075-1093.
Fattouh, B., Kilian, L., & Mahadeva, L. (2013). The role of speculation in oil markets: What have we learned so far? Energy Journal, 34(3), 7-55.
Fleming, J., Ostdiek, B., & Whaley, R. E. (1996). Trading costs and the relative rates of price discovery in stock, futures, and option markets. Journal of Futures Markets, 16(4), 353-387.
Foster, A. J. (1996). Price discovery in oil markets: A time varying analysis of the 1990–1991 gulf conflict. Energy Economics, 18(3), 231-246.
Frankel, J. A. (2013). Effects of speculation and interest rates in a “carry trade” model of commodity prices. Journal of International Money and Finance, 42(0), 88-112.
Frino, A., & West, A. (2003). The impact of transaction costs on price discovery: Evidence from cross-listed stock index futures contracts. Pacific-Basin Finance Journal, 11(2), 139-151.
Garbade, K. D., & Silber, W. L. (1979). Dominant and satellite markets: A study of dually-traded securities. The Review of Economics and Statistics, 61(3), 455-460.
Garbade, K. D., & Silber, W. L. (1983). Price movements and price discovery in futures and cash markets. The Review of Economics and Statistics, 65(2), 289-297.
Gębka, B., & Wohar, M. E. (2013). International herding: Does it differ across sectors? Journal of International Financial Markets, Institutions and Money, 23(0), 55-84.
Gonzalo, J., & Granger, C. (1995). Estimation of common long-memory components in cointegrated systems. Journal of Business & Economic Statistics, 13(1), 27-35.
Gorton, G., & Rouwenhorst, K. G. (2006). Facts and fantasies about commodity futures. Financial Analysts Journal, 62(2), 47-68.
Hammoudeh, S., Li, H., & Jeon, B. (2003). Causality and volatility spillovers among petroleum prices of WTI, gasoline and heating oil in different locations. The North American Journal of Economics and Finance, 14(1), 89-114.
Hess, D., Huang, H., & Niessen, A. (2008). How do commodity futures respond to macroeconomic news? Financial Markets and Portfolio Management, 22(2), 127-146.
Hodrick, R. J., & Prescott, E. C. (1997). Postwar US business cycles: An empirical investigation. Journal of Money, Credit, and Banking, 29(1), 1-16.
Hoffmann, A. O., Post, T., & Pennings, J. M. (2013). Individual investor perceptions and behavior during the financial crisis. Journal of Banking & Finance, 37(1), 60-74.
Ivanov, S. I., Jones, F. J., & Zaima, J. K. (2013). Analysis of DJIA, S&P 500, S&P 400, NASDAQ 100 and Russell 2000 ETFs and their influence on price discovery. Global Finance Journal, 24(3), 171-187.
Johnson, L. L. (1960). The theory of hedging and speculation in commodity futures. The Review of Economic Studies, 27(3), 139-151.
Kaufmann, R. K., & Ullman, B. (2009). Oil prices, speculation, and fundamentals: Interpreting causal relations among spot and futures prices. Energy Economics, 31(4), 550-558.
Kilian, L., & Murphy, D. P. (2013). The role of inventories and speculative trading in the global market for crude oil. Journal of Applied Econometrics, 29(3), 454-478.
Kim, M., Szakmary, A. C., & Schwarz, T. V. (1999). Trading costs and price discovery across stock index futures and cash markets. Journal of Futures Markets, 19(4), 475-498.
Kohl, W. L. (2002). OPEC behavior, 1998–2001. The Quarterly Review of Economics and Finance, 42(2), 209-233.
Li, M.-Y. L. (2010). Dynamic hedge ratio for stock index futures: Application of threshold VECM. Applied Economics, 42(11), 1403-1417.
Li, M. Y. L. (2009). The dynamics of the relationship between spot and futures markets under high and low variance regimes. Applied Stochastic Models in Business and Industry, 25(6), 696-718.
Min, J. H., & Najand, M. (1999). A further investigation of the lead–lag relationship between the spot market and stock index futures: Early evidence from Korea. Journal of Futures Markets, 19(2), 217-232.
Ng, V. K., & Pirrong, S. C. (1996). Price dynamics in refined petroleum spot and futures markets. Journal of Empirical Finance, 2(4), 359-388.
Nofsinger, J. R., & Sias, R. W. (1999). Herding and feedback trading by institutional and individual investors. The Journal of Finance, 54(6), 2263-2295.
O'Brien, T. J., & Schwarz, P. M. (1982). Ex ante evidence of backwardation/contango in commodities futures markets. Journal of Futures Markets, 2(2), 159-168.
Peri, M., Baldi, L., & Vandone, D. (2013). Price discovery in commodity markets. Applied Economics Letters, 20(4), 397-403.
Pindyck, R. S. (2001). The dynamics of commodity spot and futures markets: A primer. Energy Journal, 22(3), 1-29.
Quan, J. (1992). Two‐step testing procedure for price discovery role of futures prices. Journal of Futures Markets, 12(2), 139-149.
Ross, S. A. (1989). Information and volatility: The no‐arbitrage martingale approach to timing and resolution irrelevancy. The Journal of Finance, 44(1), 1-17.
Schwarz, T. V., & Szakmary, A. C. (1994). Price discovery in petroleum markets: Arbitrage, cointegration, and the time interval of analysis. Journal of Futures Markets, 14(2), 147-167.
Silvério, R., & Szklo, A. (2012). The effect of the financial sector on the evolution of oil prices: Analysis of the contribution of the futures market to the price discovery process in the WTI spot market. Energy Economics, 34(6), 1799-1808.
Tse, Y., Bandyopadhyay, P., & Shen, Y. P. (2006). Intraday price discovery in the DJIA index markets. Journal of Business Finance & Accounting, 33(9‐10), 1572-1585.
Tse, Y., & Xiang, J. (2005). Market quality and price discovery: Introduction of the e-mini energy futures. Global Finance Journal, 16(2), 164-179.
Working, H. (1949). The theory of price of storage. The American Economic Review, 39(6), 1254-1262.
Zouaoui, M., Nouyrigat, G., & Beer, F. (2011). How does investor sentiment affect stock market crises? Evidence from panel data. Financial Review, 46(4), 723-747.