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The Natural Gas Announcement Day Puzzle

This paper studies natural gas futures returns on EIA storage announcement days. More than 50% of the annual return is earned on these days. We find a significant difference between announcement and non-announcement day returns, which cannot be explained by the announcement surprise or other control variables. At the intraday level, the return splits half into a pre- and post-announcement part. The pre-announcement return is entirely generated on days when storage levels exceed analysts’ expectations casting doubt on explanations based on informed trading. After transaction and funding cost, a simple trading strategy yields substantial returns.

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Keywords: Gas Markets, Announcement Effect, Storage News, Intraday

DOI: 10.5547/01956574.42.2.mpro

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Published in Volume 42, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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