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Title:A partially linear approach to modelling the dynamics of spot and futures prices PDF Logo
Authors:Gaul, Jürgen
Theissen, Erik
Issue Date:2008
Series/Report no.:CFS Working Paper 2008/12
Abstract:In this paper we consider the dynamics of spot and futures prices in the presence of arbitrage. We propose a partially linear error correction model where the adjustment coefficient is allowed to depend non-linearly on the lagged price difference. We estimate our model using data on the DAX index and the DAX futures contract. We find that the adjustment is indeed nonlinear. The linear alternative is rejected. The speed of price adjustment is increasing almost monotonically with the magnitude of the price difference.
Subjects:Futures Markets
Cointegrated Systems
Partially Linear Models
Nonparametric Methods
Persistent Identifier of the first edition:urn:nbn:de:hebis:30-54405
Document Type:Working Paper
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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