Suppose we are interested in whether and how the monthly price of 3- month oil futures contract affects the WTI spot price, how would we con- struct the model? The goal of this assignment is to test whether the future price granger causes the spot price, or the other way around. Please report your results, including (not restricted to) the following:
•Discussion of the data (length, frequency, source, etc).
•Explain the pre-treatment(s) of the data if necessary.
•Construct a model for testing the possible relationship between the WTI spot and futures prices.
•Does the 3-month futures price granger cause the spot price?
•Does the 3-month futures price assist with forecasting the spot price?
Please include all equations, figures and tables necessary with your explanation in a report.
If possible use EViews and show on a separate word doc the codes/equations you used for programming.
If you use literature for referencing, please include also the page you found the information, in the sense (author year, page).
Also, give all your sources, like where you got the data from, Bloomberg etc.
Sample Solution
