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Do futures prices exhibit maturity effect? A nonparametric revisit

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Abstract:

The maturity effect (ME) of futures prices postulated by Samuelson (1965) is re-examined using three nonparametric tests. The consistent entropy asymmetry test by Racine and Maasoumi (2007) indicates that variance is an appropriate risk or uncertainty measure for ME, and value-at-risk and expected shortfall are also adopted. The Kolmogorov–Smirnov dominance test and Wilcoxon rank sum and signed rank test are employed to rank the estimates of the three risk measures under a moving-window framework. The testing outcomes are contingent on futures type, testing method and risk measures. The testing outcomes show mild support for ME.

Keywords: C53; G13; Kolmogorov–Smirnov dominance test; Wilcoxon rank sum and signed rank test; consistent entropy asymmetry test; expected shortfall; maturity effect; value-at-risk; variance

Document Type: Research Article

DOI: https://doi.org/10.1080/00036846.2013.854299

Affiliations: Department of Finance, La Trobe University, Bundoora, VIC, 3086, Australia

Publication date: 2014-03-14

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