Market Efficiency of Oil Spot and Futures: A Stochastic Dominance Approach
نویسندگان
چکیده
Working Papers are a series of manuscripts in their draft form. They are not intended for circulation or distribution except as indicated by the author. For that reason Working Papers may not be reproduced or distributed without the written consent of the author. The authors are most grateful to the Editor, Beng Wah Ang and anonymous reviewers for substantive comments and suggestions. We would like to show our appreciation to Heng Li for his assistance in the computations. Abstract This paper examines the market efficiency of oil spot and futures prices by using a stochastic dominance (SD) approach. As there is no evidence of an SD relationship between oil spot and futures, we conclude that there is no arbitrage opportunity between these two markets, and that both market efficiency and market rationality are not rejected in the oil spot and futures markets.
منابع مشابه
Investor Preferences for Oil Spot and Futures Based on Mean-Variance and Stochastic Dominance
Working Papers are a series of manuscripts in their draft form. They are not intended for circulation or distribution except as indicated by the author. For that reason Working Papers may not be reproduced or distributed without the written consent of the author. Abstract This paper examines investor preferences for oil spot and futures based on mean-variance (MV) and stochastic dominance (SD)....
متن کاملDEPARTMENT OF ECONOMICS AND FINANCE COLLEGE OF BUSINESS AND ECONOMICS UNIVERSITY OF CANTERBURY CHRISTCHURCH, NEW ZEALAND Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures
This paper examines risk-averse and risk-seeking investor preferences for oil spot and futures prices by using the mean-variance (MV) criterion and stochastic dominance (SD) approach. The MV findings cannot distinguish between the preferences of spot and futures markets. However, the SD tests show that spot dominates futures in the downside risk, while futures dominate spot in the upside profit...
متن کاملPricing of Futures Contracts by Considering Stochastic Exponential Jump Domain of Spot Price
Derivatives are alternative financial instruments which extend traders opportunities to achieve some financial goals. They are risk management instruments that are related to a data in the future, and also they react to uncertain prices. Study on pricing futures can provide useful tools to understand the stochastic behavior of prices to manage the risk of price volatility. Thus, this study eval...
متن کاملPricing of Commodity Futures Contract by Using of Spot Price Jump-Diffusion Process
Futures contract is one of the most important derivatives that is used in financial markets in all over the world to buy or sell an asset or commodity in the future. Pricing of this tool depends on expected price of asset or commodity at the maturity date. According to this, theoretical futures pricing models try to find this expected price in order to use in the futures contract. So in this ar...
متن کاملMean-variance hedging with oil futures
We analyze mean-variance-optimal dynamic hedging strategies in oil futures for oil producers and consumers. In a model for the oil spot and futures market with Gaussian convenience yield curves and a stochastic market price of risk, we find analytical solutions for the optimal trading strategies. An implementation of our strategies in an out-of-sample test on market data shows that the hedging ...
متن کامل