Limits to linear price behavior: Futures prices regulated by limits

Hall, AD; Kofman, P

Limits to linear price behavior: Futures prices regulated by limits

Hall, AD

Kofman, P

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Publication Type:: Journal Article
Citation:: Journal of Futures Markets, 2001, 21 (5), pp. 463 - 488
Issue Date:: 2001-05-01

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Field	Value	Language
dc.contributor.author	Hall, AD https://orcid.org/0000-0002-9724-951X	en_US
dc.contributor.author	Kofman, P	en_US
dc.date.issued	2001-05-01	en_US
dc.identifier.citation	Journal of Futures Markets, 2001, 21 (5), pp. 463 - 488	en_US
dc.identifier.issn	0270-7314	en_US
dc.identifier.uri	http://hdl.handle.net/10453/5375
dc.description.abstract	This article analyzes the behavior of futures prices when the exchange is regulated by price limits. With a model analogous to exchange-rate target-zone models, we tested for the existence of a nonlinear S-shape relation between observed and theoretical futures prices. This phenomenon reflects the adjustments in traders' expectations even when limits are not actually hit. The approach is illustrated for five agricultural futures contracts traded at the Chicago Board of Trade. There is some evidence of nonlinearity in quiet periods. In cases of fundamental realignments, that is, volatile periods, this nonlinearity disappears. © 2001 John Wiley & Sons, Inc.	en_US
dc.relation.ispartof	Journal of Futures Markets	en_US
dc.relation.isbasedon	10.1002/fut.5	en_US
dc.subject.classification	Finance	en_US
dc.title	Limits to linear price behavior: Futures prices regulated by limits	en_US
dc.type	Journal Article
utslib.citation.volume	5	en_US
utslib.citation.volume	21	en_US
utslib.for	150201 Finance	en_US
utslib.for	140302 Econometric and Statistical Methods	en_US
utslib.for	150202 Financial Econometrics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.issue	5	en_US
pubs.publication-status	Published	en_US
pubs.volume	21	en_US

Abstract:

This article analyzes the behavior of futures prices when the exchange is regulated by price limits. With a model analogous to exchange-rate target-zone models, we tested for the existence of a nonlinear S-shape relation between observed and theoretical futures prices. This phenomenon reflects the adjustments in traders' expectations even when limits are not actually hit. The approach is illustrated for five agricultural futures contracts traded at the Chicago Board of Trade. There is some evidence of nonlinearity in quiet periods. In cases of fundamental realignments, that is, volatile periods, this nonlinearity disappears. © 2001 John Wiley & Sons, Inc.

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http://hdl.handle.net/10453/5375