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Time-Varying Spot and Futures Oil Price Dynamics

Guglielmo Maria Caporale, Davide Ciferri and Alessandro Girardi

No 988, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We investigate the role of crude oil spot and futures prices in the process of price discovery by using a cost-of-carry model with an endogenous convenience yield and daily data over the period from January 1990 to December 2008. We provide evidence that futures markets play a more important role than spot markets in the case of contracts with shorter maturities, but the relative contribution of the two types of market turns out to be highly unstable, especially for the most deferred contracts. The implications of these results for hedging and forecasting crude oil spot prices are also discussed.

Keywords: Cointegration; oil market; futures prices; price discovery (search for similar items in EconPapers)
JEL-codes: C32 C51 G13 G14 (search for similar items in EconPapers)
Pages: 28 p.
Date: 2010
New Economics Papers: this item is included in nep-ene, nep-for and nep-mst
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Time-Varying Spot and Futures Oil Price Dynamics (2014) Downloads
Working Paper: Time-Varying Spot and Futures Oil Price Dynamics (2010) Downloads
Working Paper: Time-varying spot and futures oil price dynamics (2010) Downloads
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