Spatial Market Arbitrage and Threshold Cointegration

摘要: Goodwin and Piggott reported that corn soybean prices in spatially separated markets North Carolina exhibited threshold cointegration commodity different may persistently diverge. Here, a multivariate approach is used to test for nonlinear cointegration. The results suggest departures from the law of one price do not persist indefinitely. (GP) examined daily across bivariate pairings were threshold-cointegrated. GP twothreshold model which differences could They concluded empirical models should consider effects order adequately characterize integrated markets. purpose this article extend analysis several directions. employed techniques Martens, Kofman, Vorst involve multistepped search thresholds residuals cointegrating regression. This single-equation process subject potential misspecification, so it interesting determine whether direct Hansen Seo provides confirmatory evidence. In addition, allowed two affect each pair without directly testing number thresholds. second extension uses tests Two imply no-arbitrage bounds allow persistent price. One consistent with traditional view differentials are fleeting as arbitrageurs drive excess returns zero. final recognizes might follow relationship depends on transactions costs. Peter S. Sephton professor, School Business, Queen’s University, Kingston, Ontario, Canada. author would like thank Nick providing his dataset Dean’s Research Fund Business financial assistance. anonymous referees provided helpful comments. Sufficiently “large” deviations lead reduced dispersion. A demonstrates tend be resolved over time. Background