Causality and Price Discovery: An Application of Directed Acyclic Graphs Academic Article uri icon

abstract

  • Directed Acyclic Graphs (DAG's) and Error Correction Models (ECM's) are employed to analyze questions of price discovery between spatially separated commodity markets and the transportation market linking them together. Results from our analysis suggest these markets are highly interconnected but it is the inland commodity market that is strongly influenced by both the transportation and commodity export markets. However, the commodity markets affect the volatility of the transportation market over longer horizons. Our results suggest that transportation rates are critical in the price discovery process lending support for the recent development of exchange traded barge rate futures contracts. 2004 by The University of Chicago. All rights reserved.

published proceedings

  • The Journal of Business

author list (cited authors)

  • Haigh, M. S., & Bessler, D. A.

citation count

  • 45

complete list of authors

  • Haigh, Michael S||Bessler, David A

publication date

  • October 2004