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


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.

  • Citation: Goodwin, Barry K.; Holt, Matthew T.; Önel, Gülcan; Prestemon, Jeffrey P. 2018. Copula-based nonlinear modeling of the law of one price for lumber products. Empirical Economics. 54(3): 1237-1265. 29 p.
  • Keywords: Law of one price Copulas Nonlinear time series models
  • Posted Date: June 14, 2018
  • Modified Date: July 3, 2018
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