Efficient estimation and testing of oil futures contracts in a mutual offset system
AbstractWith the globalization of financial and commodity markets, it is becoming increasingly important to recognize price linkages between markets beyond national boundaries. Models of futures pricing that incorporate such price linkages into the information set can be expected to be superior empirically. Test results obtained in the paper support this proposition strongly in the case of Brent crude oil futures contracts traded in a mutual offset system between the Singapore International Monetary Exchange (SIMEX) and the International Petroleum Exchange (IPE). Augmented models of SIMEX Brent futures contracts are obtained by incorporating the previous day's IPE Brent futures price into the equation system for the unbiased expectations and the cost-of-carry hypotheses, whereas augmented models of IPE Brent futures contracts are obtained by incorporating the same day's SIMEX Brent futures price in the system for the two hypotheses. On the basis of tests of zero restrictions, the system for the augmented unbiased expectations hypothesis is found to be superior empirically to the system for the standard Unbiased Expectations hypothesis, and the augmented cost-of-carry system is also found to be superior empirically to the standard cost-of-carry system for both SIMEX Brent futures and IPE Brent futures contracts.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 14 (2004)
Issue (Month): 13 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAFE20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Amin, Kaushik I. & Jarrow, Robert A., 1991. "Pricing foreign currency options under stochastic interest rates," Journal of International Money and Finance, Elsevier, vol. 10(3), pages 310-329, September.
- Geert Bekaert & Robert J. Hodrick, 1991.
"On Biases in the Measurement of Foreign Exchange Risk Premiums,"
NBER Working Papers
3861, National Bureau of Economic Research, Inc.
- Bekaert, Geert & Hodrick, Robert J., 1993. "On biases in the measurement of foreign exchange risk premiums," Journal of International Money and Finance, Elsevier, vol. 12(2), pages 115-138, April.
- Campbell, J.Y. & Perron, P., 1991.
"Pitfalls and Opportunities: What Macroeconomics should know about unit roots,"
360, Princeton, Department of Economics - Econometric Research Program.
- John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220 National Bureau of Economic Research, Inc.
- John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc.
- Campbell, John & Perron, Pierre, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," Scholarly Articles 3374863, Harvard University Department of Economics.
- Engle, R. F. & Granger, C. W. J. (ed.), 1991. "Long-Run Economic Relationships: Readings in Cointegration," OUP Catalogue, Oxford University Press, number 9780198283393.
- James G. MacKinnon, 2010.
"Critical Values for Cointegration Tests,"
1227, Queen's University, Department of Economics.
- Peter C.B. Phillips & Joon Y. Park, 1986.
"Statistical Inference in Regressions with Integrated Processes: Part 2,"
Cowles Foundation Discussion Papers
819R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1987.
- Park, Joon Y. & Phillips, Peter C.B., 1989. "Statistical Inference in Regressions with Integrated Processes: Part 2," Econometric Theory, Cambridge University Press, vol. 5(01), pages 95-131, April.
- Geert Bekaert & Robert J. Hodrick, 1992.
"Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets,"
NBER Working Papers
3790, National Bureau of Economic Research, Inc.
- Bekaert, Geert & Hodrick, Robert J, 1992. " Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 467-509, June.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Fama, Eugene F & Farber, Andre, 1979.
"Money, Bonds, and Foreign Exchange,"
American Economic Review,
American Economic Association, vol. 69(4), pages 639-49, September.
- Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
- Lee, Chien-Chiang & Zeng, Jhih-Hong, 2011. "Revisiting the relationship between spot and futures oil prices: Evidence from quantile cointegrating regression," Energy Economics, Elsevier, vol. 33(5), pages 924-935, September.
- Mamatzakis, E & Remoundos, P, 2010. "Threshold Cointegration in BRENT crude futures market," MPRA Paper 19978, University Library of Munich, Germany.
- Lin, Xiaoqiang & Tang, Zhenpeng & Fei, Fangyu, 2013. "Testing for relationships between Shanghai and Shenzhen stock markets: A threshold cointegration perspective," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(18), pages 4064-4074.
- Robert Czudaj & Joscha Beckmann, 2012. "Spot and futures commodity markets and the unbiasedness hypothesis - evidence from a novel panel unit root test," Economics Bulletin, AccessEcon, vol. 32(2), pages 1695-1707.
- Guglielmo Maria Caporale & Davide Ciferri & Allessandro Girardi, 2010.
"Time-Varying Spot and Futures Oil Price Dynamics,"
Discussion Papers of DIW Berlin
988, DIW Berlin, German Institute for Economic Research.
- Guglielmo Maria Caporale & Davide Ciferri & Alessandro Girardi, 2010. "Time-Varying Spot and Futures Oil Price Dynamics," CESifo Working Paper Series 3015, CESifo Group Munich.
- Guglielmo Caporale & Davide Ciferri & Alessandro Girardi, 2010. "Time-varying spot and futures oil price dynamics," Quaderni del Dipartimento di Economia, Finanza e Statistica 75/2010, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
- Maslyuk, Svetlana & Smyth, Russell, 2009. "Cointegration between oil spot and future prices of the same and different grades in the presence of structural change," Energy Policy, Elsevier, vol. 37(5), pages 1687-1693, May.
- Mamatzakis, E. & Remoundos, P., 2011. "Testing for adjustment costs and regime shifts in BRENT crude futures market," Economic Modelling, Elsevier, vol. 28(3), pages 1000-1008, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.