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Further evidence on the explanatory power of spot food and energy commodities market prices for futures prices

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  • Phillip A. Cartwright

    (ESG Management School)

  • Natalija Riabko

    (FranceAgriMer)

Abstract

This research is focused on analyzing spillover effects from crude oil to agricultural commodities futures markets. Moreover, emphasis is placed on the “reverse” relationships between spot and futures markets with particular attention given to the interrelationships. The study is interesting for reasons of economics and finance as well as for taking into account geo-political considerations. This study lends insight into the empirical validity of reverse regressions hypothesizing that spot prices today contain information useful for predicting forward rates in the future. This paper considers the importance of the effects of temporal aggregation as well as alternative time series model specifications and assumptions on the distributions of residuals. In addition to the assumption of normality, the paper considers use of a fat-tailed distribution (multivariate t-distribution) to examine the robustness of results that are based on the normality assumption. Finally, models are compared in terms of ex post predictive validity.

Suggested Citation

  • Phillip A. Cartwright & Natalija Riabko, 2016. "Further evidence on the explanatory power of spot food and energy commodities market prices for futures prices," Review of Quantitative Finance and Accounting, Springer, vol. 47(3), pages 579-605, October.
    • Handle: RePEc:kap:rqfnac:v:47:y:2016:i:3:d:10.1007_s11156-015-0513-5
    DOI: 10.1007/s11156-015-0513-5
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    Cited by:

    1. Phillip A. Cartwright & Natalija Riabko, 2019. "Do spot food commodity and oil prices predict futures prices?," Review of Quantitative Finance and Accounting, Springer, vol. 53(1), pages 153-194, July.

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    More about this item

    Keywords

    Commodities prices; Oil; Temporal aggregation; Causality; Non-normality;
    All these keywords.

    JEL classification:

    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • G1 - Financial Economics - - General Financial Markets
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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