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

Mehrara, Mohsen; Hamldar, Monire

doi:10.18052/www.scipress.com/ILSHS.39.15

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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:

https://doi.org/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:

September 2014

Authors:

Mohsen Mehrara, Monire Hamldar

Keywords:

Cointegration, Futures Price of Brentcrude Oil, Granger Causality, Spot Price of Brentcrude Oil, Unit Root, VECM

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Distribution:

Open Access

This work is licensed under a
Creative Commons Attribution 4.0 International License

References:

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DOI: https://doi.org/10.18052/www.scipress.com/ilshs.36.75

[8] Mohsen Mehrara, Monire Hamldar, International Letters of Social and Humanistic Sciences 26 (2014) 82-87. ( Received 24 August 2014; accepted 03 September 2014 ).

DOI: https://doi.org/10.18052/www.scipress.com/ilshs.37.82

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Cited By:

[1] M. Zavadska, L. Morales, J. Coughlan, "The Lead–Lag Relationship between Oil Futures and Spot Prices—A Literature Review", International Journal of Financial Studies, Vol. 6, p. 89, 2018

DOI: https://doi.org/10.3390/ijfs6040089

[2] L. Huang, J. Li, "Some Empirical Studies on Chinese Crude Oil Futures", SSRN Electronic Journal , 2018

DOI: https://doi.org/10.2139/ssrn.3302485