Measurement of a Random Process in Futures Prices

Abstract

This paper presents the results of application of a new method of time-series analysis, which appears to give the first really satisfactory answer to the question of whether commodity futures markets facilitate excessive daily price fluctuations. The method uses an entirely new test statistic, the index of continuity, rather than autocovariance as do virtually all other methods. In order to show why the new statistic is needed, I will first sketch the current status of the relevant area of time-series analysis, and demonstrate the failure of existing methods to solve the problem at hand.