Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25547
Authors: 
Gaul, Jürgen
Theissen, Erik
Year of Publication: 
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
JEL: 
C32
C14
G13
G14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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