Investigating Nonlinear Speculation in Cattle, Corn, and Hog Futures Markets Using Logistic Smooth Transition Regression Models

Quantitative Finance Research Centre Research Paper No. 172

20 Pages Posted: 2 May 2006

See all articles by Andreas Röthig

Andreas Röthig

Deutsche Bundesbank

Carl Chiarella

University of Technology, Sydney - UTS Business School, Finance Discipline Group

Date Written: February 2006

Abstract

This article explores nonlinearities in the response of speculators' trading activity to price changes in live cattle, corn, and lean hog futures markets. Analyzing weekly data from March 4, 1997 to December 27, 2005, we reject linearity in all of these markets. Using smooth transition regression models, we find a similar structure of nonlinearities with regard to the number of different regimes, the choice of the transition variable, and the value at which the transition occurs.

Keywords: Futures markets, speculation, nonlinear dynamics, smooth transition regression model

JEL Classification: G10, G11, C22, C53

Suggested Citation

Röthig, Andreas and Chiarella, Carl, Investigating Nonlinear Speculation in Cattle, Corn, and Hog Futures Markets Using Logistic Smooth Transition Regression Models (February 2006). Quantitative Finance Research Centre Research Paper No. 172, Available at SSRN: https://ssrn.com/abstract=893083 or http://dx.doi.org/10.2139/ssrn.893083

Andreas Röthig

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Carl Chiarella (Contact Author)

University of Technology, Sydney - UTS Business School, Finance Discipline Group ( email )

PO Box 123
Broadway, NSW 2007
Australia
+61 2 9514 7719 (Phone)
+61 2 9514 7711 (Fax)

HOME PAGE: http://www.business.uts.edu.au/finance/

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