Abstract
In this paper, we propose a discrete version of the short-term and long-term component model of the agricultural futures prices. The maximum likelihood estimate of each parameter is obtained using an adaptive filtering algorithm. The diagnostics statistically support the specification of the model. The short-term components exhibit no causal relationship with economic fundamentals such as inflation rate and economic growth rate. These components, therefore, seem to be driven mainly by fads rather than market fundamentals. On the other hand, the long-term components show conitegrating relationship with only one cointegrating vector among the three futures contracts examined.
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We are grateful to an anonymous referee for many helpful comments and suggestions. Second author’s research is in part supported by a grant-in-aid of Japan Economic Research Foundation and Japan Society for the Promotion of Science
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Bhar, R., Hamori, S. Component structures of agricultural commodity futures traded on the Tokyo Grain Exchange. Asia-Pacific Finan Markets 13, 1–9 (2006). https://doi.org/10.1007/s10690-007-9032-2
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DOI: https://doi.org/10.1007/s10690-007-9032-2