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

Jürgen Gaul and Erik Theissen

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.

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Year of publication:	2012 ; This version: August 2012
Authors:	Gaul, Jürgen ; Theissen, Erik
Publisher:	Cologne : Centre for Financial Research
Subject:	Futures Markets \| Cointegration \| Partially linear models \| Nonparametric methods \| Börsenkurs \| Share price \| Aktienindex \| Stock index \| Index-Futures \| Index futures \| Arbitrage \| Kointegration \| Partielle kleinste Quadrate \| Partial least squares \| Nichtlineare Regression \| Nonlinear regression \| Schätzung \| Estimation \| Theorie \| Theory \| Deutschland \| Germany

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Extent:	Online-Ressourcee (27 S.) graph. Darst.
Series:	Working paper / Centre for Financial Research. - Köln : CFR, ZDB-ID 2458327-3. - Vol. 13-01
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Zsfassung in dt. Sprache Systemvoraussetzungen: Acrobat reader
Other identifiers:	hdl:10419/74675 [Handle]
Classification:	C32 - Time-Series Models ; C14 - Semiparametric and Nonparametric Methods ; G13 - Contingent Pricing; Futures Pricing ; G14 - Information and Market Efficiency; Event Studies
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10009750074