Linkages among agricultural commodity futures prices: some further evidence from Tokyo

Abstract

Booth and Ciner (2001) find that the prices of commodity futures traded on the Tokyo Grain Exchange (TGE) do not move together in the long run. This study analyses whether their empirical results remain true for a more recent period. The empirical results suggest that the cointegrating relation exists among commodity futures contracts from 2000 to 2003, but not earlier during the 1990s. This indicates that the price mechanism works better and the long-run relationships among prices become more apparent as a market develops.

Notes

¹ As Booth and Ciner (2001) point out, TGE futures contracts are traded using the Itayose-hoh, which is a single fixed price auction conducted for each contract month per trading session. Its important point is that the auctions for the various contracts are conducted by order of contract expiration, with the nearest contract being auctioned first. The most distant contracts are typically the most active, and thus these prices are used for empirical analysis.

² See Dickey and Fuller (1979).

³ See Kwiatkowski et al. (1992).

⁴ See Johansen (1991, 1995). Critical values obtained by MacKinnon et al. (1999) are used for cointegration test.