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Analysis of price behavior patterns for revenue projections: statistical tests of a copper price time series

Author

Listed:
  • Marcia Athayde Matias

    (University of Brasília)

  • Cesar Augusto Tiburcio Silva

    (University of Brasília)

  • Leonardo Vieira

    (University of Brasília)

Abstract

In analyzing the projected cash flow of an investment, especially when the main product is a commodity, defining future revenue as a function of the price behavior of this commodity is a widely debated question among academics and financial analysts. This study carries out econometric evaluations based on a historical copper-price series, aiming to verify whether these prices follow some behavior pattern already reported in the literature, especially mean reversion and geometric Brownian motion (GBM). Tests were performed for stationarity, autocorrelation, normality and linearity. These results indicate that copper prices in the interval studied have not followed any identified behavior pattern, suggesting that the models normally used in financial projections have a weak capacity to forecast future copper prices.

Suggested Citation

  • Marcia Athayde Matias & Cesar Augusto Tiburcio Silva & Leonardo Vieira, 2005. "Analysis of price behavior patterns for revenue projections: statistical tests of a copper price time series," Brazilian Business Review, Fucape Business School, vol. 2(2), pages 108-123, July.
    • Handle: RePEc:bbz:fcpbbr:v:2:y:2005:i:2:p:108-123
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