An ARDL model to study the spot-futures relationship in crude-refined petroleum prices.

What is it about?

This paper studies the relationship between spot and futures prices of crude and refined petroleum for the period spanning from January 2007 to April 2015. It investigates long-run and short-run elasticities and causality using the ARDL bounds testing approach and vector error correction model.

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Why is it important?

This paper contributes to commodity markets literature in several ways: (i) it studies spot and futures prices using an ARDL bounds testing approach to cointegration that allows to deal with some technical properties of the data as well as to explore short run, long run and stability in the relationships. (ii) It tests for short run and long run causalities and strong causality. (iii) The study do not interest in crude oil solely but includes refined oil products in order to cover a wide range of investigation and (iv) it investigates crude and refined oil products on the most leading market rather than in different locations or international areas, it's the NYMEX market that offers trading on a range of spot-forward energy contracts.

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