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Mean Reversion and Basis Dynamics

✍ Scribed by Michael Theobald; Peter Yallup

Publisher
John Wiley and Sons
Year
2001
Tongue
English
Weight
275 KB
Volume
21
Category
Article
ISSN
0270-7314

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

An analytical relationship between basis change autocorrelations and thin trading effects together with
partial adjustment factors is developed. Less than full price adjustments are demonstrated to lead to negative
autocorrelations in basis innovation series in addition to those induced by thin trading effects. Numerical and
empirical analyses explore the interrelationships between these effects and provide evidence for the presence of
both effects in intradaily cash and futures data. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:
797–818, 2001

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