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Do Spot Prices Move towards Futures Prices? A study on Crude Oil Market

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  • Mihaela Nicolau

    (Danubius University of Galati, Romania)

Abstract

The importance of studying the futures markets and the relationship between spot and futures prices is given by the possibility that futures contracts offer in order to reduce particular risks. The financial theory presents the relationships between spot and futures prices in the framework of both the non-arbitrage theory and the asset pricing theory, but none of themoffer information about the direction of causality between spot and futures prices. This paper attempts to analyse the dynamic relationship between spot and futures prices of the crude oil, a very important commodity. The empirical analysis is focused to examinethe causal dynamics between spot and futures prices in crude oil market; the results confirm that the prices of one and two maturity futures predict spot prices. Conversely, this is not true for longer maturity futures contracts.

Suggested Citation

  • Mihaela Nicolau, 2012. "Do Spot Prices Move towards Futures Prices? A study on Crude Oil Market," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 5(5), pages 166-176, October.
    • Handle: RePEc:dug:actaec:y:2012:i:5:p:166-176
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    2. Nicolau, Mihaela & Palomba, Giulio, 2015. "Dynamic relationships between spot and futures prices. The case of energy and gold commodities," Resources Policy, Elsevier, vol. 45(C), pages 130-143.
    3. Mihaela NICOLAU & Giulio PALOMBA & Ilaria TRAINI, 2013. "Are Futures Prices Influenced by Spot;Prices or Vice-versa? An Analysis of Crude;Oil, Natural Gas and Gold Markets," Working Papers 394, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    4. Wei, Jiangqiao & Ma, Zhe & Wang, Anjian & Li, Pengyuan & Sun, Xiaoyan & Yuan, Xiaojing & Hao, Hongchang & Jia, Hongxiang, 2022. "Multiscale nonlinear Granger causality and time-varying effect analysis of the relationship between iron ore futures and spot prices," Resources Policy, Elsevier, vol. 77(C).

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