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Mean reversion in equilibrium asset prices: evidence from the futures term structure

Article Abstract:

We use the term structure of futures prices to test whether investors anticipate mean reversion in spot asset prices. The empirical results indicate mean reversion in each market we examine. For agricultural commodities and crude oil the magnitude of the estimated mean reversion is large; for example, point estimates indicate that 44 percent of a typical spot oil price shock is expected to be reversed over the subsequent eight months. For metals, the degree of mean reversion is substantially less, but still statistically significant. We detect only weak evidence of mean reversion in financial asset prices. (Reprinted by permission of the publisher.)

Futures

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The January anomaly: effects of low share price, transaction costs, and bid-ask bias

Article Abstract:

The January effect is primarily a low-share price effect and less so a market value effect. In the recent 1977-1986 period, after-transaction-cost raw and excess January returns are lower on low-price stocks than on high-price stocks. Failure of informed traders to eliminate significantly large before-transaction-cost excess January returns on low-price stocks is potentially explained by high transaction costs and a bid ask bias. At the least, the January anomaly found in prior tests is not persistent, and thereby, not likely to be exploitable by typical investors. (Reprinted by permission of the publisher.)

Security and commodity exchanges, Economic aspects, Stock-exchange, Stock exchanges

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The temporal price relationship between S&P 500 futures and the S&P 500 index

Article Abstract:

This paper empirically examines the intraday price relationship between S&P 500 futures and the S&P 500 index using minute-to-minute data. Three-stage least-squares regression is used to estimate lead and lag relationships with estimates for expiration days of the S&P 500 futures compared with estimates for days prior to expiration. The results suggest that futures price movements consistently lead index movements by twenty to forty-five minutes while movements in the index rarely affect futures beyond one minute. (Reprinted by permission of the publisher.)

Research, Commodity futures, Standard and Poor's 500-Stock Price Index

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