Time-Varying Spot and Futures Oil Price Dynamics

34 Pages Posted: 21 Apr 2010

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Davide Ciferri

John Cabot University; Luiss Guido Carli University

Alessandro Girardi

National Institute of Statistics (ISTAT)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2010

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.

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

JEL Classification: C32, C51, G13, G14

Suggested Citation

Caporale, Guglielmo Maria and Ciferri, Davide and Girardi, Alessandro, Time-Varying Spot and Futures Oil Price Dynamics (April 2010). Available at SSRN: https://ssrn.com/abstract=1592791 or http://dx.doi.org/10.2139/ssrn.1592791

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

Kingston Lane
Marie Jahoda Building
Uxbridge, Middlesex 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/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Davide Ciferri

John Cabot University ( email )

Via della Lungara 233
Rome, 00165
Italy

Luiss Guido Carli University

Roma

Alessandro Girardi

National Institute of Statistics (ISTAT) ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
357
Abstract Views
1,600
rank
80,177
PlumX Metrics