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Copula-based nonlinear modeling of the law of one price for lumber products

Author

Listed:
  • Barry K. Goodwin

    (North Carolina State University)

  • Matthew T. Holt

    (University of Alabama)

  • Gülcan Önel

    (University of Florida)

  • Jeffrey P. Prestemon

    (USDA Forest Service)

Abstract

This paper proposes an alternative and potentially novel approach to analyzing the law of one price in a nonlinear fashion. Copula-based models that consider the joint distribution of prices separated by space are developed and applied to weekly prices for lumber products. The copulas capture nonlinearities that arise in the extremes of the joint distributions of price differentials and suggest faster equilibrating adjustments when deviations from parity are extreme.

Suggested Citation

  • Barry K. Goodwin & Matthew T. Holt & Gülcan Önel & Jeffrey P. Prestemon, 2018. "Copula-based nonlinear modeling of the law of one price for lumber products," Empirical Economics, Springer, vol. 54(3), pages 1237-1265, May.
    • Handle: RePEc:spr:empeco:v:54:y:2018:i:3:d:10.1007_s00181-017-1235-4
    DOI: 10.1007/s00181-017-1235-4
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    References listed on IDEAS

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    Cited by:

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    3. You, Zhongyuan & Goodwin, Barry K. & Guney, Selin, 2023. "A semi-parametric study on dynamic linkages among international real interest rates," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 215-229.

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