Non-linear dynamics in futures prices: evidence from the coffee, sugar and cocoa exchange

This article tests for the presence of low-dimensional chaos in the coffee, cocoa and sugar futures markets. While it finds strong evidence of non-linear dependence in the returns, the evidence is not consistent with chaos. The test results indicate that well known ARCH-type processes, with control for seasonal and contract-maturity effects, generally explain the non-linearities in the data. It also shows that employing seasonally adjusted price series and controlling for contract maturity may be important in obtaining robust results via some of the existing tests for chaotic structure. Finally, maximum likelihood methodologies that are robust to the non-linear dynamics lend strong support to the Samuelson hypothesis of maturity-effects in futures price-changes.