2014
DOI: 10.1002/fut.21693
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A Fractionally Cointegrated VAR Analysis of Price Discovery in Commodity Futures Markets

Abstract: In this paper we apply the recently developed fractionally cointegrated vector autoregressive (FCVAR) model to analyze price discovery in the spot and futures markets for five non-ferrous metals (aluminium, copper, lead, nickel, and zinc). The FCVAR model allows for long memory (fractional integration) in the equilibrium errors, and, following Figuerola-Ferretti and Gonzalo (2010), we allow for the existence of long-run backwardation or contango in the equilibrium as well, i.e. a non-unit cointegration coeffi… Show more

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Cited by 65 publications
(48 citation statements)
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“…Clearly, we then have that the forecast of the innovation for period t + 1 at time t is" t+1jt = E t (" t+1 ) = 0, andX t+1jt is then easily found from (7). Inserting also coe¢ cient estimates based on data available up to time t, denoted 2 (b;^ ;^ ;^ ;^ 1 ; : : : ;^ k ), we have that…”
Section: Forecasting From the Fcvar Modelmentioning
confidence: 99%
See 3 more Smart Citations
“…Clearly, we then have that the forecast of the innovation for period t + 1 at time t is" t+1jt = E t (" t+1 ) = 0, andX t+1jt is then easily found from (7). Inserting also coe¢ cient estimates based on data available up to time t, denoted 2 (b;^ ;^ ;^ ;^ 1 ; : : : ;^ k ), we have that…”
Section: Forecasting From the Fcvar Modelmentioning
confidence: 99%
“…The economic model for the dynamics of spot and futures prices, that will provide the theoretical foundation for our empirical analysis, was developed by Dolatabadi et al (2015Dolatabadi et al ( , 2016 building on Figuerola-Feretti and Gonzalo (2010). We briefly outline the model here to establish a natural connection to the FCVAR model described in section 2 above, and refer the reader to Dolatabadi et al (2015Dolatabadi et al ( , 2016 for details.…”
Section: Economic Model and Price Discoverymentioning
confidence: 99%
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“…Following the suggestion by Dolatabadi et al (2015), for each country paired with the US, we first use the BIC as a starting point for the lag length, and then find the nearest lag length that satisfies the following criteria: (i) the univariate Ljung-Box Q test for each residual series without showing serial correlation, and…”
Section: Empirical Evidencementioning
confidence: 99%