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Investigating Nonlinear Speculation in Cattle, Corn and Hog Futures Markets Using Logistic Smooth Transition Regression Models

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Abstract

This article explores nonlinearities in the response of speculators’ trading activity to price changes in live cattle, corn, and lean hog futures markets. Analyzing weekly data from March 4, 1997 to December 27, 2005, we reject linearity in all of these markets. Using smooth transition regression models, we find a similar structure of nonlinearities with regard to the number of different regimes, the choice of the transition variable, and the value at which the transition occurs.

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File URL: http://www.business.uts.edu.au/qfrc/research/research_papers/rp172.pdf
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Bibliographic Info

Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 172.

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Length: 20
Date of creation: 01 Feb 2006
Date of revision:
Handle: RePEc:uts:rpaper:172

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Keywords: futures marktes; speculation; nonlinear dynamics; smooth transition regression model;

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  1. Skalin, Joakim & Terasvirta, Timo, 1999. "Another Look at Swedish Business Cycles, 1861-1988," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 359-78, July-Aug..
  2. Wang, Changyun, 2001. "The behavior and performance of major types of futures traders," MPRA Paper 36426, University Library of Munich, Germany, revised Jul 2002.
  3. H. Lütkepohl & T. Teräsvirta & J. Wolters, 1995. "Investigating Stability and Linearity of a German M1 Money Demand Function," SFB 373 Discussion Papers 1995,57, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  4. Hall, Anthony D. & Skalin, Joakim & Teräsvirta, Timo, 1998. "A nonlinear time series model of El Niño," Working Paper Series in Economics and Finance 263, Stockholm School of Economics.
  5. John R. Nofsinger & Richard W. Sias, 1999. "Herding and Feedback Trading by Institutional and Individual Investors," Journal of Finance, American Finance Association, vol. 54(6), pages 2263-2295, December.
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Cited by:
  1. Sanders, Dwight R. & Irwin, Scott H. & Merrin, Robert P., 2009. "Smart Money: The Forecasting Ability of CFTC Large Traders in Agricultural Futures Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(2), August.
  2. Zhechao (Charles) Liu & Nima Kordzadeh & Yoris A. Au & Jan G. Clark, . "Investigating the Reciprocal Relationships Within Health Virtual Communities," Working Papers 0007, College of Business, University of Texas at San Antonio.

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