Different scaling behaviors of commodity spot and future prices

Kaushik Matia, Luis A N Amaral*, Stephen P. Goodwin, H. Eugene Stanley

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

47 Scopus citations

Abstract

Classic studies of spot price fluctuations for commodities like cotton and wheat have been interpreted using a power-law probability distribution with exponent α inside the Lévy-stable regime [formula presented] In contrast price fluctuations for stocks have been interpreted using a power-law probability distribution with α outside the Lévy-stable regime suggesting that stock prices are in a different universality class than spot prices for commodities. To test this possibility we analyze daily returns of spot prices for 29 commodities and daily returns of future prices for 13 commodities over a period exceeding 10 years and find that the distributions of returns for futures decay as power laws with exponents [formula presented] significantly larger than [formula presented] and hence outside the Lévy-stable domain, while for spot prices we find [formula presented] which appears to be marginally outside the Lévy-stable domain.

Original languageEnglish (US)
Pages (from-to)4
Number of pages1
JournalPhysical Review E - Statistical Physics, Plasmas, Fluids, and Related Interdisciplinary Topics
Volume66
Issue number4
DOIs
StatePublished - Oct 24 2002

ASJC Scopus subject areas

  • Statistical and Nonlinear Physics
  • Statistics and Probability
  • Condensed Matter Physics

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