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The Distributional Behavior of Futures Price Spread Changes: Parametric and Nonparametric Tests for Gold, T-Bonds, Corn and Live Cattle

Author

Listed:
  • Min-Kyoung Kim

    (University of Illinois, Urbana-Champaign)

  • Raymond M. Leuthold

    (University of Illinois, Urbana-Champaign)

  • .

Abstract

The distributional behavior for futures price spread changes is examined through parametric and nonparametric tests on four different commodities: corn and live cattle, and gold and T-bonds with two different sample sizes. Data are examined for selected periods, stable (1992) and unstable (1988). Remarkably different results were found over commodities, time period, and sample size. Actual spread changes for the smaller sample size of gold and T-bonds and of corn produced more normal distributions as intervals were widened from daily to weekly, while all live cattle spreads for actual changes were normally distributed. However, the larger sample size of both gold and T-bonds and the relative spread changes for both corn and live cattle did not converge to a normal distribution. The 'best fit' distribution was tested nonparametrically on all daily spread samples, and the logistic distribution prevailed, which supported the results of nonnormality from parametric distributional tests.

Suggested Citation

  • Min-Kyoung Kim & Raymond M. Leuthold & ., 1997. "The Distributional Behavior of Futures Price Spread Changes: Parametric and Nonparametric Tests for Gold, T-Bonds, Corn and Live Cattle," Finance 9711001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:9711001
    Note: Type of Document - Microsoft Word 97; prepared on PC; to print on HP Laser Jet; pages: 34. Office for Futures and Options Research (OFOR) at the University of Illinois, Urbana-Champaign. Working Paper 97-02. For a complete list of OFOR working papers see
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    References listed on IDEAS

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    1. Hall, Joyce A. & Brorsen, B. Wade & Irwin, Scott H., 1989. "The Distribution of Futures Prices: A Test of the Stable Paretian and Mixture of Normals Hypotheses," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(1), pages 105-116, March.
    2. Mann, Jitendar S. & Heifner, Richard G., 1976. "The Distribution of Shortrun Commodity Price Movements," Technical Bulletins 158107, United States Department of Agriculture, Economic Research Service.
    3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    4. Geoffrey Poitras, 1990. "The distribution of gold futures spreads," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 10(6), pages 643-659, December.
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    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets

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