68 Pages Posted: 15 Jun 2013
Date Written: June 4, 2013
Cointegration analysis has been used widely to quantify market integration through price arbitrage. We show that total price variability can be decomposed into: (i) magnitude of price shocks; (ii) correlation of price shocks; (iii) between-period arbitrage. All three measures depend upon data frequency, but between-period arbitrage is most affected. We measure variation of these components across time and space using English weekly wheat price data, 1770-1820. We show that conclusions about arbitrage are sensitive to the precise form of cointegration model used; different components behave differently; and different factors – in terms of transport and information – explain behaviour of different components. Previous analyses should be interpreted with caution.
Keywords: domestic trade, economic integration, grain markets, transport, England and Wales
JEL Classification: N73, Q11, R41
Suggested Citation: Suggested Citation
Brunt, Liam and Cannon, E. S., Integration in the English Wheat Market 1770-1820 (June 4, 2013). NHH Dept. of Economics Discussion Paper No. 12/2013. Available at SSRN: https://ssrn.com/abstract=2279300 or http://dx.doi.org/10.2139/ssrn.2279300