A test of the cost of carry relationship for the Australian 90 day bank accepted bill futures market

Article


Heaney, Richard A. and Layton, Allan P.. 1996. "A test of the cost of carry relationship for the Australian 90 day bank accepted bill futures market ." Applied Financial Economics. 6 (2), pp. 143-153. https://doi.org/10.1080/096031096334376
Article Title

A test of the cost of carry relationship for the Australian 90 day bank accepted bill futures market

ERA Journal ID40600
Article CategoryArticle
AuthorsHeaney, Richard A. and Layton, Allan P.
Journal TitleApplied Financial Economics
Journal Citation6 (2), pp. 143-153
Number of Pages11
Year1996
PublisherTaylor & Francis
Place of PublicationUnited Kingdom
ISSN0960-3107
1466-4305
Digital Object Identifier (DOI)https://doi.org/10.1080/096031096334376
Web Address (URL)https://www.tandfonline.com/doi/abs/10.1080/096031096334376
Abstract

In competitive markets participants in the markets rapidly drive out arbitrage profits. Thus, assuming markets are competitive, cointegration provides one test of arbitrage based pricing models as this test identifies 'longer-term' deviations from an equilibrium relationship. In this paper the equilibrium is described by the cost of carry model, an arbitrage relationship between the bank accepted bill price, the bank accepted bill futures price and the interest rate to futures contract maturity. Time series observations are available for 90 day bank accepted bill futures contracts starting with the contract maturing in June 1980 extending through to the contract maturing in March 1990. Unit root tests are conducted on the times series and these identify the underlying variables in the cost of carry relationship as I(1) processes. Cointegration tests are then applied to test for longer-term deviations from the cost of carry relationship. The level of cointegration identified in these series increases in the later half of the 1980's. Perhaps the most dramatic change in the money market occurred over the period September 1985 to April 1986 when fourteen new foreign banks set up operations in the Australian market. This resulted in a dramatic increase in the level of competition among the trading banks, the major players in the bank accepted bill futures market. Perhaps the additional players in the market and the dramatic growth in the bill market resulted in greater attention being paid to arbitrage profits arising between the bank accepted bill, and bank accepted bill futures markets.

Public Notes

Files associated with this item cannot be displayed due to copyright restrictions.

Byline AffiliationsQueensland University of Technology
Permalink -

https://research.usq.edu.au/item/yy4q1/a-test-of-the-cost-of-carry-relationship-for-the-australian-90-day-bank-accepted-bill-futures-market

  • 11
    total views
  • 0
    total downloads
  • 1
    views this month
  • 0
    downloads this month

Export as

Related outputs

The global fiscal response to COVID-19: Risks and repercussions
Makin, Anthony J. and Layton, Allan. 2021. "The global fiscal response to COVID-19: Risks and repercussions." Economic Analysis and Policy. 69, pp. 340-349. https://doi.org/10.1016/j.eap.2020.12.016
A report on the development of learning standards for economics in Australia
Guest, Ross and Layton, Allan P.. 2016. "A report on the development of learning standards for economics in Australia." Australasian Journal of Economics Education. 13 (1), pp. 1-12.
Decomposition analysis for assessing the United States 2025 emissions target: how big is the challenge?
Shahiduzzaman, Md and Layton, Allan. 2017. "Decomposition analysis for assessing the United States 2025 emissions target: how big is the challenge?" Renewable and Sustainable Energy Reviews. 67, pp. 372-383. https://doi.org/10.1016/j.rser.2016.08.042
The world and “The world business cycle chronology”
Layton, Allan P., Banerji, Anirvan and Achuthan, Lakshman. 2015. "The world and “The world business cycle chronology”." OECD Journal of Business Cycle Measurement and Analysis. 2015 (1), pp. 23-40. https://doi.org/10.1787/jbcma-2015-5jrtfl953jxp
Decomposition analysis to examine Australia's 2030 GHGs emissions target: how hard will it be to achieve?
Shahiduzzaman, Md and Layton, Allan. 2015. "Decomposition analysis to examine Australia's 2030 GHGs emissions target: how hard will it be to achieve?" Economic Analysis and Policy. 48, pp. 25-34. https://doi.org/10.1016/j.eap.2015.10.003
On the contribution of information and communication technology to productivity growth in Australia
Shahiduzzaman, Md, Layton, Allan and Alam, Khorshed. 2015. "On the contribution of information and communication technology to productivity growth in Australia." Economic Change and Restructuring: an international journal devoted to the study of comparative economics, planning and development. 48 (3-4), pp. 281-304. https://doi.org/10.1007/s10644-015-9171-9
Changes in CO2 emissions over business cycle recessions and expansions in the United States: a decomposition analysis
Shahiduzzaman, Md. and Layton, Allan. 2015. "Changes in CO2 emissions over business cycle recessions and expansions in the United States: a decomposition analysis ." Applied Energy. 150, pp. 25-35. https://doi.org/10.1016/j.apenergy.2015.04.007
Decomposition of energy-related CO2 emissions in Australia: challenges and policy implications
Shahiduzzaman, Md., Layton, Allan and Alam, Khorshed. 2015. "Decomposition of energy-related CO2 emissions in Australia: challenges and policy implications." Economic Analysis and Policy. 45, pp. 100-111. https://doi.org/10.1016/j.eap.2014.12.001
Economics for today. 3rd Asia Pacific edition
Layton, Allan P., Robinson, Tim and Tucker, Irvin B.. 2009. Economics for today. 3rd Asia Pacific edition . Melbourne, Australia. Cengage Learning Australia.
Dating the 'world business cycle'
Banerji, Anirvan, Layton, Allan P. and Achuthan, Lakshman. 2012. "Dating the 'world business cycle'." Applied Economics. 44 (16), pp. 2051-2063. https://doi.org/10.1080/00036846.2011.558479
University of Southern Queensland (case study 3)
Layton, Allan and Clarke, John. 2011. "University of Southern Queensland (case study 3)." Stella, Anthony and Bhushan, Sudhanshu (ed.) Quality assurance of transnational higher education: the experiences of Australia and India. Delhi, India. Australian Universities Quality Agency / National University of Educational Planning and Administration. pp. 145-155
Economics for today
Layton, Allan, Robinson, Tim and Tucker, Irvin B.. Wade, Frances (ed.) 2005. Economics for today. Melbourne, Australia. Nelson.
Economics for today, 1st ed.
Layton, Allan P, Robinson, Tim and Tucker, Irvin B. Waters, Kay (ed.) 2002. Economics for today, 1st ed. Melbourne. Nelson.
A new turning point signalling system using the Markov switching model with application to Japan, the USA and Australia
Layton, Allan P. and Katsuura, Masaki. 2001. "A new turning point signalling system using the Markov switching model with application to Japan, the USA and Australia." Applied Economics. 33 (1), pp. 59-70. https://doi.org/10.1080/00036840121698
Quantifying the Effect of the GST on Inflation in Australia's Capital Cities: An Intervention Analysis
Valadkhani, Abbas and Layton, Allan P.. 2004. "Quantifying the Effect of the GST on Inflation in Australia's Capital Cities: An Intervention Analysis ." The Australian Economic Review. 37 (2), pp. 125-138. https://doi.org/10.1111/j.1467-8462.2004.00314.x
What is a recession?: a reprise
Layton, Allan P. and Banerji, Anirvan. 2003. "What is a recession?: a reprise." Applied Economics. 35 (16), pp. 1789-1797. https://doi.org/10.1080/0003684032000152853
Comparison of regime switching, probit and logit models in dating and forecasting US business cycles
Layton, Allan P. and Katsuura, Masaki. 2001. "Comparison of regime switching, probit and logit models in dating and forecasting US business cycles." International Journal of Forecasting. 17 (3), pp. 403-417. https://doi.org/10.1016/S0169-2070(01)00096-6
Business cycle dynamics with duration dependence and leading indicators
Layton, Allan P. and Smith, Daniel R.. 2007. "Business cycle dynamics with duration dependence and leading indicators." Journal of Macroeconomics. 29 (4), pp. 855-875. https://doi.org/10.1016/j.jmacro.2006.02.003
Sources of volatility in Australia's export prices: evidence from ARCH and GARCH modelling
Valadkhani, Abbas, Layton, Allan P. and Karunaratne, Neil D.. 2005. "Sources of volatility in Australia's export prices: evidence from ARCH and GARCH modelling." Global Business and Economics Review. 7 (4), pp. 295-310. https://doi.org/10.1504/GBER.2005.008291
Measures of national export price volatility based on the capital asset pricing model
Layton, Allan P. and Valadkhani, Abbas. 2004. Measures of national export price volatility based on the capital asset pricing model. Brisbane, Australia. Queensland University of Technology.
A note on the rising cost of education in Australia
Valadkhani, Abbas, Worthington, A. C. and Layton, Allan P.. 2005. "A note on the rising cost of education in Australia." Economic Papers: a journal of applied economics and policy. 24 (2), pp. 97-106.
Comparing probability forecasts in Markov regime switching business cycle methods
Smith, Daniel R. and Layton, Allan P.. 2007. "Comparing probability forecasts in Markov regime switching business cycle methods." Journal of Business Cycle Measurement and Analysis. 3 (1), pp. 79-98. https://doi.org/10.1787/jbcma-v2007-art4-en
Multiple structural breaks in Australia's macroeconomic data: an application of the Lumsdaine and Papell Test
Layton, Allan P., Valadkhani, Abbas and Pahlavani, Mosayeb. 2005. "Multiple structural breaks in Australia's macroeconomic data: an application of the Lumsdaine and Papell Test." International Journal of Applied Econometrics and Quantitative Studies. 2 (3), pp. 19-32.
A cross-country anaylsis of export prices in OECD countries
Valadkhani, Abbas and Layton, Allan P.. 2006. "A cross-country anaylsis of export prices in OECD countries." Economic Papers: a journal of applied economics and policy. 25 (4), pp. 331-346.
Examining similarities among phases of business cycles: is the 1990's US expansion similar to the 1960's?
Layton, Allan P. and Katsuura, Masaki. 2001. "Examining similarities among phases of business cycles: is the 1990's US expansion similar to the 1960's?" Journal of the Japan Statistical Society. 31 (2), pp. 129-152.
Do the phases of the business cycle die of old age?
Di Venuto, Nicholas and Layton, Allan P.. 2005. "Do the phases of the business cycle die of old age?" Australian Economic Papers. 44 (3), pp. 290-305. https://doi.org/10.1111/j.1467-8454.2005.00266.x
A cross-country analysis of export prices in OECD countries
Valadkhani, Abbas and Layton, Allan P.. 2006. "A cross-country analysis of export prices in OECD countries." Economic Papers: a journal of applied economics and policy. 25 (4), pp. 331-346. https://doi.org/10.1111/j.1759-3441.2006.tb00406.x
A note on the rising cost of education in Australia
Valadkhani, Abbas, Worthington, Andrew C. and Layton, Allan P.. 2005. "A note on the rising cost of education in Australia." Economic Papers: a journal of applied economics and policy. 24 (2), pp. 97-106. https://doi.org/10.1111/j.1759-3441.2005.tb00997.x
A further note on the three phases of the US business cycle
Layton, Allan P. and Smith, Daniel. 2000. "A further note on the three phases of the US business cycle ." Applied Economics. 32 (9), pp. 1133-1143. https://doi.org/10.1080/000368400404272
The impact of socio‐economic factors on gambling expenditure
Layton, Allan and Worthington, Andrew. 1999. "The impact of socio‐economic factors on gambling expenditure ." International Journal of Social Economics. 26 (1-3), pp. 430-440. https://doi.org/10.1108/03068299910230035
A new approach to dating and predicting Australian business cycle phase changes
Layton, Allan P.. 1997. "A new approach to dating and predicting Australian business cycle phase changes ." Applied Economics. 29 (7), pp. 861-868. https://doi.org/10.1080/000368497326516
Dating and predicting phase changes in the U.S. business cycle
Layton, Allan P.. 1996. "Dating and predicting phase changes in the U.S. business cycle ." International Journal of Forecasting. 12 (3), pp. 417-428. https://doi.org/10.1016/0169-2070(95)00663-X
Further on the Nature of the Australian Business Cycle
Layton, Allan P.. 1994. "Further on the Nature of the Australian Business Cycle ." The Economic Record. 70 (208), pp. 12-18. https://doi.org/10.1111/j.1475-4932.1994.tb01820.x
Estimates of the Macroeconomic Impact of Foreign Investment in Asutralia
Layton, Allan P. and Makin, Tony. 1993. "Estimates of the Macroeconomic Impact of Foreign Investment in Asutralia ." International Economic Journal. 7 (4), pp. 35-42. https://doi.org/10.1080/10168739300000011
A further test of the influence of leading indicators on the probability of US business cycle phase shifts
Layton, Allan P. 1988. "A further test of the influence of leading indicators on the probability of US business cycle phase shifts ." International Journal of Forecasting. 14 (1), pp. 63-70. https://doi.org/10.1016/S0169-2070(97)00051-4
Do Leading Indicators Really Predict Australian Business Cycle Turning Points?
Layton, Allan P.. 1977. "Do Leading Indicators Really Predict Australian Business Cycle Turning Points? " The Economic Record. 73 (222), pp. 258-269. https://doi.org/10.1111/j.1475-4932.1997.tb00999.x