Spatial Market Arbitrage and Threshold Cointegration |
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| Authors: | Peter S. Sephton |
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| Affiliation: | Peter S. Sephton is professor, School of Business, Queen's University, Kingston, Ontario, Canada. |
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| Abstract: | Goodwin and Piggott reported that corn and soybean prices in spatially separated markets in North Carolina exhibited threshold cointegration and that commodity prices in different markets may persistently diverge. Here, a multivariate approach is used to test for threshold cointegration and nonlinear cointegration. The results suggest that departures from the law of one price do not persist indefinitely. |
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| Keywords: | arbitrage market integration threshold cointegration transactions costs |
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