Systemic Risk Transmission to Energy Futures: Weekend Information Gaps and the Breakdown of Pricing Efficiency

Abstract

This study examines the efficiency of systemic risk transmission to international oil futures markets by analyzing the dynamic connectedness between three distinct Common Volatility (COVOL) measures: Energy, Asset, and Country, and compares such with five major oil benchmarks. Utilizing a framework that combines TVP-VAR, EGARCH, and wavelet coherence analyses, we investigate whether nontrading weekend breaks create a structural barrier to the pricing of systemic risk. Our findings identify a significant Monday effect, characterized by a pronounced decoupling between systemic risk signals and oil futures prices. The effect is highly state-dependent: during the COVID-19 pandemic, the disconnect dissipated for Energy and Asset COVOL but intensified for Country COVOL, while geopolitical conflicts extended the breakdown of the signal into Tuesday. These results indicate a hierarchy of influence in which country-level systemic risks exert the strongest effect on oil markets.