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Mean Reversion and Basis Dynamics
Author(s) -
Theobald Michael,
Yallup Peter
Publication year - 2001
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.1901
Subject(s) - futures contract , economics , cash , econometrics , basis (linear algebra) , financial economics , series (stratigraphy) , mean reversion , mathematics , macroeconomics , paleontology , geometry , biology
An analytical relationship between basis change autocorrelations and thin trading effects together withpartial adjustment factors is developed. Less than full price adjustments are demonstrated to lead to negativeautocorrelations in basis innovation series in addition to those induced by thin trading effects. Numerical andempirical analyses explore the interrelationships between these effects and provide evidence for the presence ofboth effects in intradaily cash and futures data. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:797–818, 2001