Time-varying spot and futures oil price dynamics

Caporale, Guglielmo Maria and Ciferri, Davide and Girardi, Alessandro (2010) Time-varying spot and futures oil price dynamics. Centre for International Capital Markets discussion papers, 2010 (08). pp. 1-29. ISSN 1749-3412

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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.

Item Type: Article
Uncontrolled Keywords: Centre for International Capital Markets discussion papers; CICM discussion papers; cointegration; oil market; futures prices; price discovery
Subjects: 300 Social sciences > 330 Economics
Department: Guildhall School of Business and Law
Depositing User: Mary Burslem
Date Deposited: 20 Apr 2015 10:48
Last Modified: 20 Apr 2015 10:48
URI: http://repository.londonmet.ac.uk/id/eprint/419

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