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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:
Sep 2014
Authors:
Mohsen Mehrara, Monire Hamldar
Keywords:
Cointegration, Futures Price of Brentcrude Oil, Granger Causality, Spot Price of Brentcrude Oil, Unit Root, VECM
Export:
RIS, BibTeX, Text
Distribution:
Open Access

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

References:

[1] Garbade K.D., Silber W.L., Review of Economics and Statistics 65 (1983) 289-297.

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[3] Silvapulle P., Moosa I.A., The Journal of Futures Markets 19 (1999) 175-193.

[4] Abbas Ali Rezaei, International Letters of Social and Humanistic Sciences 23 (2014) 1-20.

[5] Seyed Reza Seyed-Javadin, Reza Raei, Mohammad Javad Iravani, Mohammad Safari, International Letters of Social and Humanistic Sciences 24 (2014) 45-55.

DOI: https://doi.org/10.18052/www.scipress.com/ilshs.35.45

[6] Farhad Rahbar, Mostafa Sargolzaei, International Letters of Social and Humanistic Sciences 24 (2014) 95-105.

[7] Mohsen Mehrara, Fateme Ghamati, International Letters of Social and Humanistic Sciences 25 (2014) 75-81.

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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