Copula-based nonlinear modeling of the law of one price for lumber products

Barry Goodwin (), Matthew Holt, Gulcan Onel and Jeffrey P. Prestemon
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Jeffrey P. Prestemon: USDA Forest Service

Empirical Economics, 2018, vol. 54, issue 3, No 14, 1237-1265

Abstract: Abstract This paper proposes an alternative and potentially novel approach to analyzing the law of one price in a nonlinear fashion. Copula-based models that consider the joint distribution of prices separated by space are developed and applied to weekly prices for lumber products. The copulas capture nonlinearities that arise in the extremes of the joint distributions of price differentials and suggest faster equilibrating adjustments when deviations from parity are extreme.

Keywords: Law of one price; Copulas; Nonlinear time series models (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00181-017-1235-4

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