Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74675
Authors: 
Gaul, Jürgen
Theissen, Erik
Year of Publication: 
2012
Series/Report no.: 
CFR Working Paper 13-01
Abstract: 
This paper considers the dynamics of spot and futures prices in the presence of arbitrage. A partially linear error correction model is proposed where the adjustment coefficient is allowed to depend non-linearly on the lagged price difference. The model is estimated 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
Cointegration
Partially linear models
Nonparametric methods
JEL: 
C32
C14
G13
G14
Document Type: 
Working Paper

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