TY - JOUR
T1 - Cointegration Analysis of Metals Futures
AU - Watkins, C.D.
AU - Mcaleer, Michael
PY - 2002
Y1 - 2002
N2 - \The London Metal Exchange (LME) is a centre for spot and futures trading in the main industrially-used non-ferrous metals. In this paper, the market for 3-month LME copper futures contracts is analysed. The risk premium hypothesis and the cost-of-carry (COC) model are the standard theoretical models for pricing futures contracts, but these two models have rarely been estimated within a unified framework for metals futures. Single equation versions of the risk premium hypothesis and the COC model are nested within a general model. If the spot price, futures price, interest rate and stock level variables contain stochastic trends, long-run versions of the general model can be estimated within the cointegration framework. The long-run pricing models are estimated using daily LME copper price data over the period 3 January 1989 to 30 September 1998. Likelihood ratio tests are used to test restrictions on the general model. (C) 2002 IMACS. Published by Elsevier Science B.V. All rights reserved.
AB - \The London Metal Exchange (LME) is a centre for spot and futures trading in the main industrially-used non-ferrous metals. In this paper, the market for 3-month LME copper futures contracts is analysed. The risk premium hypothesis and the cost-of-carry (COC) model are the standard theoretical models for pricing futures contracts, but these two models have rarely been estimated within a unified framework for metals futures. Single equation versions of the risk premium hypothesis and the COC model are nested within a general model. If the spot price, futures price, interest rate and stock level variables contain stochastic trends, long-run versions of the general model can be estimated within the cointegration framework. The long-run pricing models are estimated using daily LME copper price data over the period 3 January 1989 to 30 September 1998. Likelihood ratio tests are used to test restrictions on the general model. (C) 2002 IMACS. Published by Elsevier Science B.V. All rights reserved.
U2 - 10.1016/S0378-4754(01)00409-8
DO - 10.1016/S0378-4754(01)00409-8
M3 - Article
VL - 59
SP - 207
EP - 221
JO - Mathematics and Computers in Simulation
JF - Mathematics and Computers in Simulation
SN - 0378-4754
ER -