The Price Correlation between Crude Oil Spot and Futures - Applying the Rank Test Method

• Main Authors: Chia-Lun Tsai, 蔡佳倫
• Other Authors: Chia-Wu Lu
• Format: Others
• Language: en_US
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/73952373385722394124

碩士 === 靜宜大學 === 財務金融研究所 === 98 === Using the non-parametric rank tests proposed by Breitung (2001), we set out in this study to determine whether any non-linear long-run equilibrium relationship exists between the petroleum spot and futures prices. We then estimate the nonlinear and asymmetry Threshold Error-correction model (TECM) with Bivariate GJR-GARCH model to capture the short-run and long-run dynamic adjustments with the asymmetric price and volatility transmissions between the petroleum spot and futures prices. We find that the petroleum futures prices are cointegrated and nonlinear with spot prices in the long-run. This effectively confirms the expectation hypothesis and that asymmetric adjustment for the futures basis toward the long-run value display a positive basis from the long-run equilibrium level more persistently than a negative basis from that level. In the variance equations, we find that when bad news happens in the petroleum spot and futures markets, volatility will increase in its own market. Besides, asymmetric effects are also found in both the petroleum spot and futures markets in our conditional variance models.