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A general consensus rejects effective commodityarbitrage and the law of one price. But this consensus is mistaken because itis based on research using retail prices where price differentials do notrepresent risk-free profits. Using commodity auction prices, a few articlessupport effective arbitrage and the LOP. Using longer intervals and a wider variety of commodities than everbefore, this paper provides even stronger support for effectivecommodity arbitrage and the Law of One Price. In addition, for the first time,it uses commodity auction prices rather than retail prices to look for bordereffects and rejects them.

KEYWORDS

Exchange Rates, Arbitrage, Law of One Price, Borders, Half Lives, Auction Markets

Cite this paper

Pippenger, J. 2016 Commodity Arbitrage and the Law of One Price: Setting the Record Straight. Theoretical Economics Letters, 6, 1017-1033. doi: 10.4236-tel.2016.65101.





Autor: John Pippenger

Fuente: http://www.scirp.org/



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