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| Author: | Fraser, P. Mckaig, A. J. |
| Title: | Basis variation and a common source of risk: evidence from UK futures markets |
| Journal: | European Journal of Finance
2001 : MAR, VOL. 7:1, p. 39-62 |
| Index terms: | FINANCE RISK RISK ANALYSIS BONDS STOCK MARKETS FUTURES MARKETS |
| Language: | eng |
| Abstract: | Using multiple equation Generalized Method of Moments (GMM) system estimation procedures and monthly data at the three maturity horizons of 6, 9 and 12 months, the paper explores whether conditional spreads between futures and spot rates on five contracts traded on LIFFE have a common predictable component driven by a single unobservable source of risk. The future contracts studied are: 3-month ECU; 3-month Euromark; FT100 Index; German Government Bond; and 3-month Short Sterling. The sample period is October 1989 through August 1996. Movement in the price of systematic risk is proxied by ex ante variables that have been shown to have predictive power for returns from bond and stock markets. |
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