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The Relationship between Spot and Futures Prices in Brent Oil Crude Market

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Abstract:

This paper investigates the relationship between spot and futures prices in Brent Crude Oil Market using daily data over the period 1990/17/8-2014/11/3. The results of unit root test indicate that both of the spot and futures prices variables are non-stationary. The results of the Johansen cointegration test suggest that there is a long-run relationship between these variables. The dynamic Granger causality captured from the vector error correction model indicates strong bidirectional effects between the spot and futures price of Brent Crude Oil. The coefficient of the ECT and lagged explanatory variables are significant in both equations which indicates that long-run as well as short-run bidirectional causalities between log of spot and futures price.

Info:

Periodical:
International Letters of Social and Humanistic Sciences (Volume 39)
Pages:
15-19
DOI:
10.18052/www.scipress.com/ILSHS.39.15
Citation:
M. Mehrara and M. Hamldar, "The Relationship between Spot and Futures Prices in Brent Oil Crude Market", International Letters of Social and Humanistic Sciences, Vol. 39, pp. 15-19, 2014
Online since:
Sep 2014
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