Re-examining the movements of crude oil spot and futures prices over time

We carry out a (partial) replication exercise of Chang and Lee (2015) unit root and cointegration analyses of crude oil spot and futures prices. In doing so, we offer an updated and expanded analysis based on a much wider set of oil futures series than that considered by Chang and Lee, and we consider the impact of different temporal aggregation methods. Although we are not able to exactly replicate their findings, we nonetheless reach qualitatively similar findings to theirs when using their dataset in terms of the long-run properties and interactions of the spot and futures prices data. Likewise, qualitatively comparable results are obtained when using our expanded dataset. However, a number of important qualitative differences from Chang and Lee arise in terms of the analysis of causality between spot and futures contract prices. As part of our replication exercise we also investigate some aspects that were not originally considered by Chang and Lee. In doing this, we find that both the variability of futures prices as well as the speed of adjustment of futures/spot price differentials increase as the maturity of the contracts increase.

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