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Threshold Cointegration in BRENT crude futures market
Emmanuel Mamatzakis,P Remoundos +1 more
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In this paper, a threshold vector error-correction (TVECM) model was used to evaluate the degree and dynamics of transaction costs resulting from various market imperfections, and they found that BRENT crude spot and futures are cointegrated, though two regimes are clearly identified.Abstract:
This paper, using a threshold vector error-correction (TVECM) model, examines whether BRENT crude spot and futures oil prices are cointegrated. By employing this methodology we are able to evaluate the degree and dynamics of transaction costs resulting from various market imperfections. TVECM model is applied on daily spot and futures oil prices covering the period 1990-2009. The hypothesis we test is to what extent BRENT crude is indeed an integrated oil market in terms of threshold effects and adjustment costs. Our findings support that market follows a gradual integration path. We find that BRENT crude spot and futures are cointegrated, though two regimes are clearly identified. This implies that a threshold exists and it is indeed significant. Adjustment costs in the error correction are present, and they are valid at the typical regime that is the dominant, and as a result should not be ignored.read more
Citations
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Cointegration Between Oil Spot and Future Prices of the Same and Different Grades in the Presence of Structural Change
Svetlana Maslyuk,Russell Smyth +1 more
TL;DR: This paper examined whether crude oil spot and futures prices of the same and different grades are cointegrated using a residual-based cointegration test that allows for one structural break in the cointegrating vector and high-frequency data.
Posted Content
Measuring Market Integration In The Presence Of Transaction Costs - A Threshold Vector Error Correction Approach
TL;DR: In this article, a restricted two-threshold model is developed in which the significance of the thresholds can be tested, and this model is used to estimate market integration on the European pig market.
A Market-augmented Model for SIMEX Brent Crude Oil Futures Contracts
John M. Sequeira,Michael McAleer +1 more
TL;DR: In this paper, an error-correction representation of two standard futures pricing models, namely the unbiased expectations and cost-of-carry hypotheses, are formulated for SIMEX Brent crude oil futures contracts.
Journal ArticleDOI
Price Dynamics under the presence of Threshold Effects in WTI Crude Oil Markets
TL;DR: In this article, the authors analyzed long run adjustment process to equilibrium and short run dynamics with WTI spot and futures prices using bivariate 3-regime TVECM, after dividing the entire sample period into five sub-samples, and applied this model to each sub-sample.
References
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TL;DR: In this paper, the authors examine tests for cointegration which allow for the possibility of regime shifts and propose ADF, Z α, Z t and Z t-type tests designed to test the null of no co-integration against the alternative of cointegrations in the presence of a possible regime shift, where the intercept and/or slope coefficients have a single break of unknown timing.
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