JavaScript is disabled for your browser. Some features of this site may not work without it.
Does the basis regression overstate the predictive value of the futures price?
Date:
2014
Type:
Text
Source:
Proceedings of the 44th Atlantic Schools of Business conference, Mount Saint Vincent University, 2014, pp 88-93
Abstract:
The spread between the current spot and futures prices (the basis) is one of the most popular predictors of movement in the future spot price.
This paper demonstrates that the use of a popular regression technique to evaluate the ability of the futures price to predict movement in the spot price results in a test statistic with a non-standard distribution. A small Monte-Carlo experiment reveals that standard procedures may result in a high probability of type one error.
This paper demonstrates that the use of a popular regression technique to evaluate the ability of the futures price to predict movement in the spot price results in a test statistic with a non-standard distribution. A small Monte-Carlo experiment reveals that standard procedures may result in a high probability of type one error.
Subject:
- Regression analysis
- Basis (Futures trading)
- Spot prices
URI:
Link to Full Text
Files in this item
| Files | Size | Format | View |
|---|---|---|---|
|
There are no files associated with this item. |
|||