Price discovery in European natural gas markets

We provide the first high-frequency investigation of price discovery within the physical and financial layers of Europe's natural gas markets. Testing not only looks at short-term return dynamics, but also considers each security's contribution to price equilibrium in the longer-term. Results show that UK natural gas futures traded on the Intercontinental Exchange display greater price discovery than physical trading at various hubs throughout Europe. - Highlights: • We use intraday data to gauge price discovery in European natural gas markets. • We explore short and long-term dynamics in physical and financial market layers. • Results show ICE's UK natural gas futures are the main venue for price discovery