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Integration in the English wheat market 1770-1820

  • Brunt, Liam
  • Cannon, Edmund

Cointegration analysis has been used widely to quantify market integration through price arbitrage. We show that total price variability can be decomposed into: (i) magnitude of price shocks; (ii) correlation of price shocks; (iii) between-period arbitrage. All three measures depend upon data frequency, but between-period arbitrage is most affected. We measure variation of these components across time and space using English weekly wheat price data, 1770-1820. We show that conclusions about arbitrage are sensitive to the precise form of cointegration model used; different components behave differently; and different factors – in terms of transport and information – explain behaviour of different components. Previous analyses should be interpreted with caution.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9504.

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Date of creation: Jun 2013
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Handle: RePEc:cpr:ceprdp:9504
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  28. Brunt, Liam & Edmund Cannon, 2002. "Do Banks Improve Financial Market Integration?," Royal Economic Society Annual Conference 2002 36, Royal Economic Society.
  29. repec:cup:cbooks:9780521650960 is not listed on IDEAS
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