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Lead Lag Relationships Between Resource Prices and Corresponding Resource Company Share Prices

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  • Stevenson, Alan
  • Boyd, Milton
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    Abstract

    The purpose of this study is to examine the lead lag relationships between resource prices and corresponding resource company share prices. It is hypothesized that as a resource price changes, the share price should also change for a corresponding company producing the resource. However, price changes and price transmission between the two markets may have lag periods. Lags may occur due to factors such as transaction costs, taxes, information arriving in large doses, market imperfections, and market trends. Granger causality tests are used to determine lead lag relationships and direction of causality. The main industries examined are grains, oil, lumber, gold, silver, and copper. Approximately 50 company share prices are included.

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    File URL: http://purl.umn.edu/125959
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    Bibliographic Info

    Paper provided by Australian Agricultural and Resource Economics Society in its series 2001 Conference (45th), January 23-25, 2001, Adelaide with number 125959.

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    Date of creation: Jan 2001
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    Handle: RePEc:ags:aare01:125959

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    Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200
    Phone: 0409 032 338
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    Web page: http://www.aares.info/
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    Related research

    Keywords: resource prices; price transmission; lead lag realtionships; and Granger Causality; Demand and Price Analysis;

    References

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    1. Pierce, David A. & Haugh, Larry D., 1977. "Causality in temporal systems : Characterization and a survey," Journal of Econometrics, Elsevier, vol. 5(3), pages 265-293, May.
    2. Boyd, Milton S & Brorsen, B Wade, 1986. "Dynamic Price Relationships for U.S. and EC Corn Gluten Feed and," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 13(2), pages 199-215.
    3. Geweke, John & Meese, Richard & Dent, Warren, 1983. "Comparing alternative tests of causality in temporal systems : Analytic results and experimental evidence," Journal of Econometrics, Elsevier, vol. 21(2), pages 161-194, February.
    4. Milton S. Boyd & B. Wade Brorsen, 1985. "Dynamic Relationship of Weekly Prices In the United States Beef and Pork Marketing Channels," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 33(3), pages 331-342, November.
    5. Leuthold, Raymond M & Garcia, Philip & Chaherli, Nabil, 1992. "Information, Pricing and Efficiency in Cash and Futures Markets: The Case of Hogs," The Economic Record, The Economic Society of Australia, vol. 0(0), pages 27-33, Supplemen.
    6. Michael Price, J., 1979. "The characterization of instantaneous causality : A correction," Journal of Econometrics, Elsevier, vol. 10(2), pages 253-256, June.
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