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Cointegration and commodity arbitrage

Author

Listed:
  • Sohbet Karbuz

    (Department of Economics, University of Bielefeld, Germany)

  • Adusei Jumah

    (Federal Institute of Agricultural Economics, Vienna, Austria)

Abstract

The study uses the concept of cointegration to examine long-run relationships between futures (and spot) prices of cocoa and coffee on the New York CSCE and London Fox. The study is also an attempt to analyze price trends of related commodities on the same and different commodity exchanges. Our empirical results show that in general, the prices of these commodities tend to move together in the long run. The study also proves that empirical evidence can be used to support the assumption that commodity prices are perfectly arbitraged in international markets over a long period of time. © 1995 by John Wiley & Sons, Inc.

Suggested Citation

  • Sohbet Karbuz & Adusei Jumah, 1995. "Cointegration and commodity arbitrage," Agribusiness, John Wiley & Sons, Ltd., vol. 11(3), pages 235-243.
    • Handle: RePEc:wly:agribz:v:11:y:1995:i:3:p:235-243
    DOI: 10.1002/1520-6297(199505/06)11:3<235::AID-AGR2720110305>3.0.CO;2-P
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    References listed on IDEAS

    as
    1. Working, Holbrook, 1960. "Price Effects of Futures Trading," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 1(1), pages 1-31.
    2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. John Baffes, 1991. "Some Further Evidence on the Law of One Price: The Law of One Price Still Holds," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1264-1273.
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    Citations

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    Cited by:

    1. Adusei Jumah, 2001. "The effects of dollar-sterling exchange rate volatility on futures markets for coffee and cocoa," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 28(3), pages 307-328, October.
    2. Kushankur Dey & Debasish Maitra, 2012. "Price discovery in Indian commodity futures market: an empirical exercise," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 5(1), pages 68-87.
    3. Liang, Chyi-Lyi (Kathleen) & Feuz, Dillon M. & Taylor, R. Garth, 1998. "Spatial And Varietal Price Analysis Of Dry Edible Bean Markets," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 1(3), pages 1-17.
    4. Elumalai, K. & Rangasamy, N. & Sharma, R.K., 2009. "Price Discovery in India’s Agricultural Commodity Futures Markets," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 64(3), pages 1-9.
    5. 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.
    6. Yang, Jian & Leatham, David J., 1999. "Price Discovery in Wheat Futures Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 31(2), pages 359-370, August.
    7. John M. Fry & Baoying Lai & Mark Rhodes, 2011. "The interdependence of Coffee spot and futures market," Working Papers 2011.1, International Network for Economic Research - INFER.
    8. Alexis H. Villacis & Jeffrey R. Alwang & Victor Barrera & Juan Dominguez, 2022. "Prices, specialty varieties, and postharvest practices: Insights from cacao value chains in Ecuador," Agribusiness, John Wiley & Sons, Ltd., vol. 38(2), pages 426-458, April.
    9. Carvalho, Glauco Rodrigues & Bessler, David & Hemme, Torsten & Schröer-Merker, Eva, 2015. "Understanding International Milk Price Relationships," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196692, Southern Agricultural Economics Association.
    10. Adusei Jumah & Sohbet Karbuz & Gerhard Runstler, 1999. "Interest rate differentials, market integration, and the efficiency of commodity futures markets," Applied Financial Economics, Taylor & Francis Journals, vol. 9(1), pages 101-108.
    11. W. Erno Kuiper & Matthew T.G. Meulenberg, 2002. "Vertical price leadership: A cointegration analysis," Agribusiness, John Wiley & Sons, Ltd., vol. 18(3), pages 317-331.

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