A partially linear approach to modelling the dynamics of spot and futures prices

Jürgen Gaul and Erik Theissen

No 13-01, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

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.

Keywords: Futures Markets; Cointegration; Partially linear models; Nonparametric methods (search for similar items in EconPapers)
JEL-codes: C14 C32 G13 G14 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ecm
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/74675/1/748718885.pdf (application/pdf)

Related works:
Journal Article: A Partially Linear Approach to Modeling the Dynamics of Spot and Futures Prices (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:1301

Access Statistics for this paper

More papers in CFR Working Papers from University of Cologne, Centre for Financial Research (CFR) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().