Degree of Integration between Brent Oil Spot and Futures Markets: Intraday Evidence

47 Pages Posted: 15 Nov 2014 Last revised: 19 Aug 2017

See all articles by A. Can Inci

A. Can Inci

Bryant University

H. Nejat Seyhun

University of Michigan, Stephen M. Ross School of Business

Date Written: July 15, 2017

Abstract

We investigate the integration of oil spot and futures markets using matched, intraday data to avoid non-synchronous trading issues. Our evidence indicates highly integrated spot and futures markets. Economic shocks that arise in spot markets are quickly transmitted to the futures markets approximately one-for-one. Most of the reaction takes place within minutes. Similarly, economic shocks arriving in futures markets are transmitted to spot markets one-for-one, once again, within minutes consistent with market efficiency. Overall, our findings indicate well-functioning, well-integrated spot and futures oil markets that are informationally efficient and that perform the functions of both price discovery and risk transfer. This is the first paper to work with precisely matched customized data in futures markets, specifically oil futures.

Keywords: Natural Resources, Futures Markets, Brent, Integration of Markets, Co-integration, Granger Causality

JEL Classification: G13, G14, Q32, Q35, Q41

Suggested Citation

Inci, Ahmet Can and Seyhun, H. Nejat, Degree of Integration between Brent Oil Spot and Futures Markets: Intraday Evidence (July 15, 2017). Available at SSRN: https://ssrn.com/abstract=2524017 or http://dx.doi.org/10.2139/ssrn.2524017

Ahmet Can Inci

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917
United States

H. Nejat Seyhun (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-5463 (Phone)

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