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Time-Varying Spot and Futures Oil Price Dynamics


Guglielmo Maria Caporale


London South Bank University; Brunel University - Brunel Business School; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Davide Ciferri


John Cabot University; LUISS Guido Carli

Alessandro Girardi


National Institute of Statistics (ISTAT)
April 2010

CESifo Working Paper Series No. 3015

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.

Number of Pages in PDF File: 34

Keywords: cointegration, oil market, futures prices, price discovery

JEL Classification: C32, C51, G13, G14

working papers series


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Date posted: April 21, 2010  

Suggested Citation

Caporale, Guglielmo Maria, Ciferri, Davide and Girardi, Alessandro, Time-Varying Spot and Futures Oil Price Dynamics (April 2010). CESifo Working Paper Series No. 3015. Available at SSRN: http://ssrn.com/abstract=1592791

Contact Information

Guglielmo Maria Caporale (Contact Author)
London South Bank University ( email )
Centre for Monetary and Financial Economics
London
United Kingdom
Brunel University - Brunel Business School ( email )
Kingston Lane Uxbridge
Middlesex, West London
Uxbridge, UB8 3PH, London UB8 3PH
United Kingdom
+44 1895 266713 (Phone)
+44 1895 269770 (Fax)
HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
Munich, DE-81679
Germany
Davide Ciferri
John Cabot University ( email )
Via della Lungara 233
Rome, 00165
Italy
LUISS Guido Carli
Roma
Alessandro Girardi
National Institute of Statistics (ISTAT) ( email )
Via Cesare Balbo 16
00184 Rome, 0185
Italy
Feedback to SSRN (Beta)


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