Abstract:
The study was intended to reveal the relationship among the spot and future
price of crude oil, which in turn will help in determining the prices of crude
oil. While structuring a portfolio, high correlation among assets alone cannot
be taken as a satisfactory measure for long run diversification paybacks. There
is a crucial need to enhance the traditional risk-return modeling methodologies
by giving due consideration to common long term trends among the asset
prices. Considering this pressing need, the present paper attempts to explore
the long run and short run relationship between spot and future prices of crude
oil using time series data. To estimate the long and short run dynamics of crude
oil prices, the present study applies the Johansen cointegration, and vector error
correction modelling to time series analysis.
