Hostname: page-component-77c89778f8-gq7q9 Total loading time: 0 Render date: 2024-07-16T09:11:48.616Z Has data issue: false hasContentIssue false
  • English
  • Français

The Distributional Behavior of Futures Price Spreads

Published online by Cambridge University Press:  28 April 2015

Min-Kyoung Kim  and
Raymond M. Leuthold
Min-Kyoung Kim
Affiliation:
T. A. Hieronymous Professor in the Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign
Raymond M. Leuthold
Affiliation:
T. A. Hieronymous Professor in the Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign
Get access Rights & Permissions [Opens in a new window]

Abstract

The distributional behavior of futures price spreads is examined for four commodities: corn, live cattle, gold and T-bonds. Remarkably different results are found over commodities, time period, and sample size. Actual spread changes for the smaller sample size of gold and T-bonds and for corn produce more normal distributions for weekly than for daily differencing intervals, while all live cattle spreads for actual changes are normally distributed. However, the larger sample size of both gold and T-bonds and the relative spread changes for corn and live cattle do not become more normally distributed under temporal aggregation of the data.

Keywords

cornfutures price spreadsgoldgoodness of fitlive cattlenormality testsspread distributionsT-bonds
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 32 , Issue 1 , April 2000 , pp. 73 - 87
Copyright
Copyright © Southern Agricultural Economics Association 2000

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bera, A. and Jarque, C. M.. “A Test for Normality of Observations and Regression Residuals.” International Statistical Review 55(1987):163–172.Google Scholar
Billingsley, R.S. and Chance, D. M.. “The Pricing and Performance of Stock Index Futures Spreads.” Journal of Futures Markets 8(1988):303–318.CrossRefGoogle Scholar
Blattberg, R.C. and Gonedes, N.. “A Comparison of the Stable Paretian Distribution and Student Distribution as Statistical Model for Prices.” Journal of Business 47(1984):244–280.CrossRefGoogle Scholar
Bowman, K.O. and Shenton, L. R.. “Omnibus Test Contours for Departures from Normality Based on b1 and b2.” Biometrika 62(1975):243–250.Google Scholar
Castelino, M.G. and Vora, A.. “Spread Volatility in Commodity Futures: The Length Effect.” Journal of Futures Markets 4(1984):39–46.CrossRefGoogle Scholar
Cornew, R.W., Town, D. E., and Crowson, L. D.. “Stable Distributions, Futures Price, and the Measurement of Trading Performance.” Journal of Futures Markets 4(1984):531–557.CrossRefGoogle Scholar
D'Agostino, R.B., Belanger, A., and D'Agostino, R.B. Jr. “A Suggestion for Using Powerful and Informative Tests of Normality.” American Statistician 44(1990):316–321.Google Scholar
D'Agostino, R.B. and Pearson, E. S.. “Tests for Departure from Normality. Empirical Results for the Distributions of b2 and b1. Biometrika 60(1973):613–622.Google Scholar
Davidson, R. and Mackinnon, J. G.. Estimation and Inference in Econometrics. New York: Oxford University Press, 1993.Google Scholar
DeGroot, M.H.Probability and Statistics, 2nd Edition. Reading: Addison-Wesley, 1989.Google Scholar
Hall, J.A.Brorsen, B.W., and Irwin, S. H.. “The Distribution of Futures Prices: A Test of the Stable Paretian and Mixture of Normals Hypothesis.” Journal of Financial and Quantitative Analysis 24(1989):105–116.CrossRefGoogle Scholar
Houthakker, H.S. “Systematic and Random Element in Short-term Price Movement.” American Economic Review 51(1961):164–172.Google Scholar
Hsu, D.A.Miller, R.B., and Wichern, D. W.. “On the Stable Paretian Behavior of Stock Market Prices.” Journal of American Statistical Association 69(1974):108–113.CrossRefGoogle Scholar
Hudson, M.A., Leuthold, R. M., and Saras-soro, G. F.. “Commodity Futures Price Changes: Recent Evidence for Wheat, Soybeans and Live Cattle.” Journal of Futures Markets 7(1987):287–301.CrossRefGoogle Scholar
Mann, J. S. and R. G. Heifner. The Distribution of Shortrun Commodity Price Movements. Economic Research Service, USDA, Technical Bulletin No. 1536, 1976.Google Scholar
Monroe, M. and Cohn, R. A.. “The Relative Efficiency of the Gold and Treasury Bill Futures Markets.” Journal of Futures Markets 6(1986):477–493.CrossRefGoogle Scholar
Officer, R.R. “The Distribution of Stock Returns.” Journal of the American Statistical Association 67(1972):807–812.CrossRefGoogle Scholar
Palisade Corporation Editors. Bestfit, Release 1.02, Palisade Corporation, 1994.Google Scholar
Pearson, E.S., D'Agostino, R. B., and Bowman, K. O.. “Tests for Departure from Normality: Comparison of Powers.” Biometrika 64(1977):231–246.CrossRefGoogle Scholar
Poitras, G. N. “The Distribution of Gold Futures Spreads.” Journal of Futures Markets 10(1990):643–659.CrossRefGoogle Scholar
Ramanathan, R. (1993). Statistical Methods in Econometrics. San Diego: Academic Press, Inc, 1993.Google Scholar