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Empirical Economics

, Volume 54, Issue 3, pp 1237–1265 | Cite as

Copula-based nonlinear modeling of the law of one price for lumber products

  • Barry K. Goodwin
  • Matthew T. Holt
  • Gülcan Önel
  • Jeffrey P. Prestemon
Article

Abstract

This paper proposes an alternative and potentially novel approach to analyzing the law of one price in a nonlinear fashion. Copula-based models that consider the joint distribution of prices separated by space are developed and applied to weekly prices for lumber products. The copulas capture nonlinearities that arise in the extremes of the joint distributions of price differentials and suggest faster equilibrating adjustments when deviations from parity are extreme.

Keywords

Law of one price Copulas Nonlinear time series models 

JEL Classification

F-020 C-580 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  • Barry K. Goodwin
    • 1
  • Matthew T. Holt
    • 2
  • Gülcan Önel
    • 3
  • Jeffrey P. Prestemon
    • 4
  1. 1.Department of EconomicsNorth Carolina State UniversityRaleighUSA
  2. 2.Department of Economics, Finance, and Legal StudiesUniversity of AlabamaTuscaloosaUSA
  3. 3.Food and Resource Economics DepartmentUniversity of FloridaGainesvilleUSA
  4. 4.Forestry Sciences LaboratoryUSDA Forest ServiceResearch Triangle ParkUSA

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