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Linkages between spot and futures prices: Tests of the Fama-French-Samuelson hypotheses

  • John T. Cuddington
  • Arturo L. Va'squez Cordano

    ()

    (Division of Economics and Business, Colorado School of Mines)

This paper develops GARCH and VEC-MGARCH-based tests of four hypotheses from Fama and French (1988) involving linkages between spot and futures prices --- both their levels and variances. The tests are applied to monthly data for seven metals traded on the London Metal Exchange over the period 1988:11, where available, through 2008:07.

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File URL: http://econbus.mines.edu/working-papers/wp201309.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by Colorado School of Mines, Division of Economics and Business in its series Working Papers with number 2013-09.

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Length: 36 pages
Date of creation: Aug 2013
Date of revision:
Handle: RePEc:mns:wpaper:wp201309
Contact details of provider: Postal: Golden, Colorado 80401
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Web page: http://econbus.mines.edu/

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  1. Fama, Eugene F & French, Kenneth R, 1988. " Business Cycles and the Behavior of Metals Prices," Journal of Finance, American Finance Association, vol. 43(5), pages 1075-93, December.
  2. Ramey, Valerie A, 1989. "Inventories as Factors of Production and Economic Fluctuations," American Economic Review, American Economic Association, vol. 79(3), pages 338-54, June.
  3. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-77, Sept.-Oct.
  4. Symeonidis, Lazaros & Prokopczuk, Marcel & Brooks, Chris & Lazar, Emese, 2012. "Futures basis, inventory and commodity price volatility: An empirical analysis," MPRA Paper 39903, University Library of Munich, Germany.
  5. Lester G. Telser, 1958. "Futures Trading and the Storage of Cotton and Wheat," Journal of Political Economy, University of Chicago Press, vol. 66, pages 233.
  6. Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-31, February.
  7. BAUWENS, Luc & LAURENT, Sébastien & ROMBOUTS, Jeroen, 2003. "Multivariate GARCH models: a survey," CORE Discussion Papers 2003031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Brian D. Wright & Jeffrey C. Williams, 1989. "A theory of negative prices for storage," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 9(1), pages 1-13, 02.
  9. Bresnahan, Timothy F & Suslow, Valerie Y, 1985. "Inventories as an Asset: The Volatility of Copper Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 409-24, June.
  10. Peter C.B. Phillips & Sam Ouliaris, 1987. "Asymptotic Properties of Residual Based Tests for Cointegration," Cowles Foundation Discussion Papers 847R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1988.
  11. Working, Holbrook, 1933. "Price Relations Between July And September Wheat Futures At Chicago Since 1885," Wheat Studies, Stanford University, Food Research Institute, issue 06, March.
  12. Bresnahan, Timothy F & Spiller, Pablo T, 1986. "Futures Market Backwardation under Risk Neutrality," Economic Inquiry, Western Economic Association International, vol. 24(3), pages 429-41, July.
  13. Radetzki, Marian, 2006. "The anatomy of three commodity booms," Resources Policy, Elsevier, vol. 31(1), pages 56-64, March.
  14. Ng, Victor K & Pirrong, Stephen Craig, 1994. "Fundamentals and Volatility: Storage, Spreads, and the Dynamics of Metals Prices," The Journal of Business, University of Chicago Press, vol. 67(2), pages 203-30, April.
  15. Watkins, Clinton & McAleer, Michael, 2005. "Related commodity markets and conditional correlations," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 68(5), pages 567-579.
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